The biggest bad news out there': Gold eyes U.S.-China trade tensions next week

Gold prices are back in the rally mode Friday, rising above $1,750 an ounce, with analysts looking for more gains next week as U.S.-China trade tensions ramp up and the economic data worsens.

The rise in U.S.-China tensions is "the biggest bad news out there," and gold tends to rally on that, said Gainesville Coins precious metals expert Everett Millman.

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Trade tensions surged to new levels at the end of the week after U.S. President Donald Trump said on Thursday that he had no interest in speaking to Chinese President Xi Jinping while adding that he could potentially cut ties completely with China. Trump has been calling out China, stating that he is disappointed with its failure to contain coronavirus.

Tensions ramped up further on Friday when the Trump administration announced that it is moving to block shipments of semiconductors to Huawei Technologies from global chipmakers. In response, China said it was ready to place U.S. companies on an "unreliable entity list," which could include Apple, Cisco Systems, and Qualcomm. China also said it could suspend purchases of Boeing Co airplanes.

Going forward, the U.S.-China issue will once again become a big deal, Millman told Kitco News. "I don't see those tensions improving. If anything, the longer we have any kind of problem with coronavirus, the more it will ramp up that rhetoric between the U.S. and China," he said.

For gold, the next step is to reach the $1,800 an ounce level, which is now just a question of time, said FXTM market analyst Han Tan.

"The coming months remain paved with downside risks and the threat of chilling U.S.-China relations amid this global pandemic will only further inhibit global risk appetite," Tan noted on Friday. "Gold's path of least resistance remains to the upside, so hitting the $1,800 handle is just a matter of time. A host of potential positive catalysts for Bullion remain in the offing, including … a spike in US-China trade tensions."

The $1,800 target is even possible next week, if we see further outflows from the U.S. equity funds, said Blue Line Futures chief market strategist Phillip Streible. "Gold looks like it is starting to gain some momentum. We should continue to see investors pile in," Streible said.

At the time of writing, June Comex gold futures were trading at $1,756.90, up 2.5% on the week.

Anna Golubova
Kitco NEWS

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