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Gold Prices Hit 8-Month High Amid Global Tension, Hopes for Patient Fed

Investing.com - Gold prices hit an 8-month high on Tuesday as global tensions supported the safe-haven metal and investors bet

Investing.com - Gold prices hit an 8-month high on Tuesday as global tensions supported the safe-haven metal and investors bet the Federal Reserve will reinforce their decision to pause on policy tightening.

At 11:59 AM ET (16:59 GMT), gold futures for February delivery on the Comex division of the New York Mercantile Exchange gained $5.05, or 0.39%, to $1,308.15 a troy ounce, its highest level since May 2008.

“Gold soldiers on amid weaker stocks, U.S.-China trade tensions (Huawei), U.S. sanctions on Venezuela and speculation the Fed will come to the rescue on Wednesday,” Saxobank’s head of commodity strategy Ole Hansen explained.

The U.S. Department of Justice brought criminal charges against Chinese tech company Huawei that include accusations of trying to skirt U.S. sanctions on Iran and stealing robotic technology from U.S. carrier T-Mobile NASDAQ:TMUS), but China quickly condemned the actions as “unfair and immoral”, urging Washington to stop its “unreasonable suppression”.

The spat escalated tension ahead of the next round of trade talks between the world’s two largest economies that will begin on Wednesday, although U.S. Treasury Secretary Steve Mnuchin insisted that he expects significant progress and that the case against Huawei is a separate issue.

Adding to safe-haven appetite, the U.S. Treasury Department imposed sanctions on Venezuelan state-owned oil firm PDVSA as Washington called for the removal of current president Nicolas Maduro and backed the opposition leader, Juan Guaido, who has declared himself interim president.

“The risk is that we end up in a protracted stalemate and it begins to look more like an old Cold War style conflict where you have the Chinese and the Russians supporting Maduro and the rest of the world supporting Guaido," Deutsche Bank (DE:DBKGn) economist Michael Spencer told CNBC.

Traders also focused on the Fed's two-day policy meeting that kicked off on Tuesday, amid expectations that Chairman Jerome Powell will acknowledge growing risks to the U.S. economy as global momentum weakens and reiterate the central bank’s recent promise to remain patient and flexible in its approach to additional rate hikes.

Higher interest rates tend to weigh on demand for gold, which doesn’t bear interest, in favor of yield-bearing investments.

Although economists still forecast two rate hikes this year, federal funds futures contracts imply an expectation for no hikes in 2019.

In other metals trading, silver futures gained 0.58% at $15.857 a troy ounce by 12:01 PM ET (17:01 GMT).

Palladium futures rose 1.81% to $1,312.60 an ounce, while sister metal platinum traded up 0.41% at $817.80.

In base metals, copper advanced 1.57% to $2.722 a pound.