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Chart of the Day: Gold (XAUUSD)

The refocus on US-China trade tensions, with Trump ordering 10% tariffs on US$300bil of Chinese exports, reportedly against the advice of his close advisors, has seen a new period of outperformance from safe-haven assets.

Chart of the Day - Aug 5, 2019 - XAUUSD, daily

Gold (XAUUSD) managed a rally of 1.4% of the week, taking its appreciation year-to-date to 12.4%, while gold in AUD terms (XAUAUD) gained 3% on the week to trade to a new all-time high. It was only really gold in JPY terms that struggled, highlighting that the JPY has returned as the instrument to own in times of uncertainty. The fact we’ve seen a renewed bid in US Treasuries and global bond markets more broadly is also helping gold. We can see an incredible US$14.5tril of all global bonds now have a negative yield. To put context on that number, that’s 26% of all outstanding bonds commanding a negative yield.

It isn’t hard to see the attraction of holding gold in that environment, especially when the market is back on with the belief that a September rate cut (from the Fed) isn’t only a done deal at this point, but interest-rate markets are pricing a 9% of a 50bp cut. We can see the US Treasury yield curve flattening out, with 10-year bond yields falling faster than two-year bonds. A move through 10bp (on the US-twos-vs-tens curve) will likely push the gold price higher, still.

On the weekly chart, we see price printing a weekly outside period. But drill down into the daily chart, and price is testing the top of its recent trading range — a firm close through US$1,448 and the prospect of US$1,500 increase.

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