By Barani Krishnan
Investing.com – A modest retreat from six-year highs above $1,500 has taken some of gold’s shine off, but longs in the precious metal are digging their heels in for a deeper, prolonged rally.
Spot gold, reflective of trades in bullion, traded at $1,502.13 per ounce by 2:00 PM ET (18:00 GMT), up 82 cents, or 0.1%. On Wednesday, bullion’s hit $1,510.38, its highest price since May 2013.
Gold futures for December delivery, traded on the Comex division of the New York Mercantile Exchange, settled down $10.10, or 0.7%, at $1,509.50. December gold surged to $1,522.35 in the previous session, a peak since Aug 2013.
Gold prices had been on a tear over the past four sessions, after China devalued its yuan in response to U.S. President Donald Trump threat to impose from Sept. 1 a 10% tariff on untaxed Chinese imports worth $300 billion. Many investors also went for gold, expecting deeper rate cuts by the Federal Reserve over the coming months as global central banks embarked on easing to try and avert an economic slowdown.
Thursday’s decline in gold came after July trade data from China provided some relief to global economic worries. Surprise growth in exports, its biggest since March, and a less-than-expected decline in imports sent an encouraging message to markets. The yuan was, meanwhile, at 7.0452 to the dollar, rebounding from Wednesday’s low of 7.0643.
But some economists warned that relief could be temporary if Washington follows through with additional tariffs on Chinese goods in September.
“Nothing has changed fundamentally with regards to the US-China situation, or the global economic outlook with today’s positive trade figures from China coming in on the back of very weak German industrial data from the day before,” said Fawad Razaqzada, analyst at FOREX.com.
“Although the probabilities of a further 25 basis point cut in the Fed’s September meeting as implied by Fed fund futures may have fallen from as much as 85%, the markets are still pricing in a 76.5% chance of a cut. Further rate cuts should help to boost precious metals.”
With the trade war not appearing to end anytime soon, analysts think gold futures could seek a perch in the $1,800 territory in the coming weeks, closing in on its 2011 record high of $1,911.60.
Bullion remains up 4.6% on the week, 6.7% on the month and almost 17.5% on the year.
December gold has, meanwhile, carries a gain of 3.6% on the week, 5% on the month and almost 15.7% on the year.