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| Gold hits six-year high as geopolitical tensions bubble - business live | Gold hits six-year high as geopolitical tensions bubble - business live |
| (31 minutes later) | |
| Analyst Naeem Aslam of Think Markets is confident that gold will keep climbing. | |
| He thinks it could soon hit $1,550 per ounce, up more than another hundred dollars. | |
| Why? The tensions between the US and Iran are one factor, as is the weaker US dollar (which pushes up the cost of commodities priced in $). | |
| But there’s another reason. The boom in bond prices means more debt is only offering a negative yield (ie, you actually lose money by holding the bond until it matures). In that environment, gold looks more attractive. | |
| Aslam writes: | |
| An important factor which investors should be paying attention to is the correlation between the gold price and the size of the negative-yield debt. The chart below shows that there is a strong correlation which means that the gold price rises as the size of the negative yield debt increases. | |
| This makes perfect sense, of course, no one likes to have negative yield debt. The safer bet is the shining metal. Given the current monetary policy adopted by the European Central Bank and the Federal Reserve bank, it is likely that the gold price may actually touch $1550 in the next few months. | |
| Gold actually got as high as $1,438/ounce in choppy overnight trading (highest since May 2013), before settling around $1,430 now. | |
| Neil Wilson of Markets.com says a “perfect blend of supporting factors” is responsible for its surge. | Neil Wilson of Markets.com says a “perfect blend of supporting factors” is responsible for its surge. |
| Four things are really driving gold – falling yields, a weaker dollar, a soft macroeconomic outlook and geopolitical risks rising in the Middle East. | Four things are really driving gold – falling yields, a weaker dollar, a soft macroeconomic outlook and geopolitical risks rising in the Middle East. |
| Gold has risen to $1,430, as Iran’s president launches a broadside at Donald Trump. | Gold has risen to $1,430, as Iran’s president launches a broadside at Donald Trump. |
| President Rouhani, in a TV speech, declared that America’s new financial sanctions on top Iranians will fail. He also insisted that the restrictions on supreme leader Khamenei will fail, as he doesn’t own any foreign assets anyway. | President Rouhani, in a TV speech, declared that America’s new financial sanctions on top Iranians will fail. He also insisted that the restrictions on supreme leader Khamenei will fail, as he doesn’t own any foreign assets anyway. |
| Dubbing the White House “retarded”, Rouhini also accuses the US of lying about seeking talks with Tehran. | Dubbing the White House “retarded”, Rouhini also accuses the US of lying about seeking talks with Tehran. |
| #BREAKING Iran's Rouhani says US 'lying' about talks offer pic.twitter.com/vvsZX9aRzi | #BREAKING Iran's Rouhani says US 'lying' about talks offer pic.twitter.com/vvsZX9aRzi |
| Comments from Iranian President Rouhani via @ForexLive * I think trade wars are preferable to sanction wars ... #iran #tariffman pic.twitter.com/YGO8no3JAW | Comments from Iranian President Rouhani via @ForexLive * I think trade wars are preferable to sanction wars ... #iran #tariffman pic.twitter.com/YGO8no3JAW |
| Britain’s FTSE 100 index of leading blue-chip shares has fallen 40 points at the start of trading, down 0.5% to 7,375 points. | Britain’s FTSE 100 index of leading blue-chip shares has fallen 40 points at the start of trading, down 0.5% to 7,375 points. |
| Other European markets are also dipping, following the losses in Asia overnight. This has pulled the EU-wide Stoxx 600 index down by 0.4%. | Other European markets are also dipping, following the losses in Asia overnight. This has pulled the EU-wide Stoxx 600 index down by 0.4%. |
| Precious metals miners are bucking the trend, though. Fresnillo (Mexico’s largest gold producer) is up 1% in London. | Precious metals miners are bucking the trend, though. Fresnillo (Mexico’s largest gold producer) is up 1% in London. |
| Bitcoin is also rallying today --- up another 2% to $11,267, a 15-month high. | Bitcoin is also rallying today --- up another 2% to $11,267, a 15-month high. |
| #Gold and #bitcoin (digital gold for some)! pic.twitter.com/txcVGQsOmA | #Gold and #bitcoin (digital gold for some)! pic.twitter.com/txcVGQsOmA |
| While gold climbs, Asian stocks are ending the day in the red. | While gold climbs, Asian stocks are ending the day in the red. |
| After a weak session, China’s CSI 300 stock index has closed down 1%. | After a weak session, China’s CSI 300 stock index has closed down 1%. |
| Hong Kong’s Hang Seng shed 1.3% while Japan’s Nikkei dipped by 0.4%. | Hong Kong’s Hang Seng shed 1.3% while Japan’s Nikkei dipped by 0.4%. |
| Gold’s rally shows no signs of stopping, reports Bloomberg, thanks to geopolitical issues around the globe. | Gold’s rally shows no signs of stopping, reports Bloomberg, thanks to geopolitical issues around the globe. |
| It says: | It says: |
| Bullion’s been on a tear this month as the dollar weakened after the Fed opened the door to an interest rate cut and other central banks also pivoted to a more dovish stance. Investors are taking note -- pouring into exchange-traded funds backed by the precious metal and boosting net long positions in U.S. gold futures and options. Morgan Stanley said gold is its top commodity pick on a six-month view as the uncertain macroeconomic outlook adds to its appeal. | Bullion’s been on a tear this month as the dollar weakened after the Fed opened the door to an interest rate cut and other central banks also pivoted to a more dovish stance. Investors are taking note -- pouring into exchange-traded funds backed by the precious metal and boosting net long positions in U.S. gold futures and options. Morgan Stanley said gold is its top commodity pick on a six-month view as the uncertain macroeconomic outlook adds to its appeal. |
| “The global capital market’s mood is shaky due to the fear of the unknowns and it’s this uncertainty that will continue to provide the jet fuel for an already high-octane gold market,” Stephen Innes, managing partner at Vanguard Markets Pte, said in a note. | “The global capital market’s mood is shaky due to the fear of the unknowns and it’s this uncertainty that will continue to provide the jet fuel for an already high-octane gold market,” Stephen Innes, managing partner at Vanguard Markets Pte, said in a note. |
| Gold surges to the highest level in almost six years as fresh U.S. sanctions on Iran added to uncertainty in global markets https://t.co/JsVAABh032 pic.twitter.com/O4edmtbQSX | Gold surges to the highest level in almost six years as fresh U.S. sanctions on Iran added to uncertainty in global markets https://t.co/JsVAABh032 pic.twitter.com/O4edmtbQSX |
| The gold price has jumped by over 10% this month, rising from $1,288/ounce at the end of May to $1,426 this morning. | The gold price has jumped by over 10% this month, rising from $1,288/ounce at the end of May to $1,426 this morning. |
| Alfonso Esparza, a senior market analyst at OANDA, believes bullion could surge higher, if the US and China can’t reach a trade deal at the G20 meeting. | Alfonso Esparza, a senior market analyst at OANDA, believes bullion could surge higher, if the US and China can’t reach a trade deal at the G20 meeting. |
| He writes: | He writes: |
| “The main event this week will be the sidebar meeting between Trump and Xi, which could stop the current gold rally with a productive sit-down that ends up in a trade agreement,” | “The main event this week will be the sidebar meeting between Trump and Xi, which could stop the current gold rally with a productive sit-down that ends up in a trade agreement,” |
| “The flip side could boost gold prices even further as the Trump administration has shown that it could turn from friendly to aggressive in a heartbeat further fuelling investor’s demand for a safe haven.” | “The flip side could boost gold prices even further as the Trump administration has shown that it could turn from friendly to aggressive in a heartbeat further fuelling investor’s demand for a safe haven.” |
| Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business. | Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business. |
| Jitters over the US-China trade war and tensions in the Middle East continue to buffet markets. | Jitters over the US-China trade war and tensions in the Middle East continue to buffet markets. |
| Overnight, Iran has hit back at America’s decision to impose new sanctions on its supreme leader, Ayatollah Ali Khamenei, saying it has slammed the door of diplomacy shut. | Overnight, Iran has hit back at America’s decision to impose new sanctions on its supreme leader, Ayatollah Ali Khamenei, saying it has slammed the door of diplomacy shut. |
| Iran says US sanctions on supreme leader mean 'permanent closure' of diplomacy | Iran says US sanctions on supreme leader mean 'permanent closure' of diplomacy |
| So, with president Trump accusing Iran of “increasingly provocative actions”, the threat of military action in the Gulf hasn’t gone away. | So, with president Trump accusing Iran of “increasingly provocative actions”, the threat of military action in the Gulf hasn’t gone away. |
| President Trump has just signed an executive order to deny Iran's Supreme Leader and his associates access to key financial resources and support. pic.twitter.com/14qE9iUe61 | President Trump has just signed an executive order to deny Iran's Supreme Leader and his associates access to key financial resources and support. pic.twitter.com/14qE9iUe61 |
| Most Asian stock markets have dipped overnight, and we’re expecting a weaker start in Europe too. | Most Asian stock markets have dipped overnight, and we’re expecting a weaker start in Europe too. |
| Investors have one eye on the Middle East, and another on the upcoming G20 meeting of world leaders in Japan. | Investors have one eye on the Middle East, and another on the upcoming G20 meeting of world leaders in Japan. |
| The markets would like to see Trump cut a ceasefire deal with president Xi. But China isn’t rolling over; yesterday, Chinese Vice Commerce Minister Wang Shouwen said both sides need to compromise. Hawkish US officials aren’t in the mood to compromise on issues like forced technology transfer, though. | The markets would like to see Trump cut a ceasefire deal with president Xi. But China isn’t rolling over; yesterday, Chinese Vice Commerce Minister Wang Shouwen said both sides need to compromise. Hawkish US officials aren’t in the mood to compromise on issues like forced technology transfer, though. |
| So faced with this picture, investors are piling into safe-haven assets. | So faced with this picture, investors are piling into safe-haven assets. |
| Gold has hit a six-year high today, currently changing hands at $1,426 per ounce for the first time since 2013 (when eurozone crisis worries were raging). That’s an increase of nearly 1%, adding to recent gains. | Gold has hit a six-year high today, currently changing hands at $1,426 per ounce for the first time since 2013 (when eurozone crisis worries were raging). That’s an increase of nearly 1%, adding to recent gains. |
| Ipek Ozkardeskaya, analyst at London Capital Group, says money is “pouring into gold”. | Ipek Ozkardeskaya, analyst at London Capital Group, says money is “pouring into gold”. |
| She adds: | She adds: |
| Investors are reluctant to move their capital elsewhere in the middle of a worsening US-Iran thunderstorm and ahead of the G20 summit. | Investors are reluctant to move their capital elsewhere in the middle of a worsening US-Iran thunderstorm and ahead of the G20 summit. |
| Traders are also shunning the US dollar, which is on its longest losing stretch in a year and a half. | Traders are also shunning the US dollar, which is on its longest losing stretch in a year and a half. |
| They’re expecting the Federal Reserve to start slashing interest rates next month, especially now Trump is accusing them of childish incompetence... | They’re expecting the Federal Reserve to start slashing interest rates next month, especially now Trump is accusing them of childish incompetence... |
| Despite a Federal Reserve that doesn’t know what it is doing - raised rates far too fast (very low inflation, other parts of world slowing, lowering & easing) & did large scale tightening, $50 Billion/month, we are on course to have one of the best Months of June in US history... | Despite a Federal Reserve that doesn’t know what it is doing - raised rates far too fast (very low inflation, other parts of world slowing, lowering & easing) & did large scale tightening, $50 Billion/month, we are on course to have one of the best Months of June in US history... |
| ....Think of what it could have been if the Fed had gotten it right. Thousands of points higher on the Dow, and GDP in the 4’s or even 5’s. Now they stick, like a stubborn child, when we need rates cuts, & easing, to make up for what other countries are doing against us. Blew it! | ....Think of what it could have been if the Fed had gotten it right. Thousands of points higher on the Dow, and GDP in the 4’s or even 5’s. Now they stick, like a stubborn child, when we need rates cuts, & easing, to make up for what other countries are doing against us. Blew it! |
| Also coming up today | Also coming up today |
| In London, MPs will be questioning the Financial Conduct Authority. Andrew Bailey, head of the City watchdog, can expect some tough questions over the Neil Woodford crisis. | In London, MPs will be questioning the Financial Conduct Authority. Andrew Bailey, head of the City watchdog, can expect some tough questions over the Neil Woodford crisis. |
| We’re also expecting new UK retail sales figures, and US consumer confidence and housing data -- which may bolster the case for an interest rate cut. | We’re also expecting new UK retail sales figures, and US consumer confidence and housing data -- which may bolster the case for an interest rate cut. |
| The agenda | The agenda |
| 1oam BST: The FCA testifies to the UK Treasury Committee | 1oam BST: The FCA testifies to the UK Treasury Committee |
| 11am BST: CBI survey of UK retail sales in May released | 11am BST: CBI survey of UK retail sales in May released |
| 2pm BST: US house price index for May | 2pm BST: US house price index for May |
| 3pm BST: US consumer confidence stats for June | 3pm BST: US consumer confidence stats for June |