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Gold climbs as U.S. riots spark safe-haven rush

· Gold prices rose on Monday as riots in major U.S. cities rattled investors already reeling from strained China-U.S. relations and boosted demand for the safe-haven metal, with a weaker dollar lending further support.

· Spot gold gained 0.8% to $1,739.75 per ounce by 0242 GMT. U.S. gold futures ticked up 0.1% to $1,752.60.

· “Concerns about the unrest in the United States at the moment appear to be weighing on market sentiment,” said Michael McCarthy, chief strategist at CMC Markets, adding that rising tensions between the world’s top two economies provided further support to gold.

· Protesters have flooded the streets in the United States over the death of George Floyd in police custody, in a wave of outrage sweeping a politically and racially divided nation.

· The closely packed crowds and demonstrators not wearing masks have sparked fears of a resurgence of Covid-19, which has killed more than 101,000 Americans.

· In Asia, China’s state media and the government of Hong Kong lashed out on Sunday at U.S. President Donald Trump’s pledge to end Hong Kong’s special status if Beijing imposes new national security laws on the city.

· Gold is often used as a safe store of value during times of political and financial uncertainty.

· Indicative of sentiment, holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, rose 0.3% to 1,123.14 tonnes on Friday, a fresh seven-year high.

· Further supporting gold’s appeal, the dollar index fell 0.4% against its rivals.

· Gold is consolidating recent gains before tackling $1800

After reaching a high of $1788 in early April, the gold price has been consolidating recent gains while attempting to build a new floor above $1675 per ounce. Although the safe-haven metal will likely close the month above $1700 later today, gold futures have been trading within a $100 range between $1675 and $1775 for the past eight weeks.

Gold may be in the process of building a strong accumulative base in this range preparing to break out into all-time highs in U.S. dollars, as it has already done so when priced in every other major currency. The $1800 level is strong resistance going back to 2012, and a consolidation process just below this region is not surprising.

Meanwhile, investors are faced with uncertainty like we have never seen before and global central banks continue to inject huge amounts of money into their respective economies in order to prevent complete collapse. All this economic uncertainty has been bullish for gold prices, as SPDR Gold Trust holdings (GLD) hit a seven-year high on Wednesday.

Also, on Wednesday, both the European Union (EU) and Japan went big on new economic stimulus measures in response to the coronavirus crisis, giving both gold and equities a boost. The European Commission recovery fund, dubbed "Next Generation EU", includes €500 billion in grants and €250 billion in loans for member states, with the money borrowed on financial markets and repaid from the bloc's budget. European Commission President Ursula von der Leyen has called the pandemic an unprecedented crisis and hopes the package shown will satisfy all member states.

Additionally, for an economy that is over 70% dependent on the consumer, having a total of 40.77 million Americans file initial jobless claims since the week of March 21st will undoubtedly keep the Fed’s historic commitment to unlimited quantitative easing for the foreseeable future. This means that normalizing interest rates is not something that is going to happen anytime soon and lower interest rates gives gold a stronger appeal to investors as an asset.

· KITCO | Wall St., Main St. look for further gains in gold prices

“I am still bullish,” said Kevin Grady, president of Phoenix Futures and Options LLC. “We saw some liquidation in the futures this week due to the rolling of the June contract into August. The cost to roll to August traded as high as $22. That is causing some funds to rethink holding their long position. That being said, the global inflationary environment should continue to give gold a floor on sell-offs and will eventually lead to higher prices.”

Phil Flynn, senior market analyst with at Price Futures Group, also looks for gold to tick higher.

“Gold has had fits and starts,” Flynn said. “Money flowing back into stocks has taken away some of gold’s luster. Yet increasing tensions between the U.S. and China and continued economic stimulus around the globe should give gold an upward track.”

Sean Lusk, co-director of commercial hedging with Walsh Trading, also sees gold higher due to rising tensions between the U.S. and China. For one thing, that could end up being a “speed bump” for a U.S. stock market that has been speeding ahead lately, he said. Gold has also been helped by a downside break in the U.S. dollar below chart support, he added.

“If that continues to deteriorate, that only helps gold in the long run,” Lusk said.

Jim Wyckoff, senior technical analyst with Kitco, looks for gold to trade higher since the chart picture remains bullish and “risk aversion increases due to China worries.”

Charlie Nedoss, senior market strategist with LaSalle Futures Group, cited not only the technicals but geopolitical jitters and the softer U.S. dollar as factors that could help August gold test $1,760 and maybe even$1,780. As of when he spoke, he was encouraged that August gold was above its 20-day average of $1,735.20 and had a chance to finish the week above the 10-day average of $1,743.90.

“The geopolitical uncertainty is starting to kick in with what’s going on with China and what’s going on in the Middle East,” Nedoss said. “You have the dollar on the ropes and coming off, and that’s going to be supportive of gold in the next week.”

· Speculators cut their bullish positions in COMEX gold and increased them in silver contracts in the week to May 26, the U.S. Commodity Futures Trading Commission said on Friday.

· Elsewhere, silver jumped 2% to $18.20 per ounce, its highest since Feb. 26, before retreating slightly to trade 1.8% higher at $18.16.

Palladium rose 0.7% to $1,958.25 per ounce, while platinum declined 0.3% to $835.56.

Reference: Kitco, CNBC