Business

Gold up 1% as attack on Saudi facilities boosts safe-haven assets

Updated : September 17, 2019 01:51 PM IST

Central banks globally face increasing pressure to dole out monetary support for flagging economies as the US-China trade war hurts trade and business sentiment.

US gold futures settled up 0.8 percent at $1,511.50.

Gold up 1% as attack on Saudi facilities boosts safe-haven assets

Gold gained 1 percent on Monday after attacks on oil facilities in Saudi Arabia fueled concerns of a further escalation in Middle East tensions and pushed investors toward safe-haven assets.

Spot gold climbed 1 percent to $1,503.31 per ounce at 1:36 pm.

US gold futures settled up 0.8 percent at $1,511.50.

"The Saudi Arabian situation is driving gold prices higher as people are looking for havens, (watching out) for any negative fallout, both economic and political," said George Gero, managing director at RBC Wealth Management

"Gold will continue to be steady on the upside if there's an escalation (in the Saudi Arabia situation)."

Drone attacks on two plants at the heart of Saudi Arabia's oil industry on Saturday triggered a surge in oil prices and a slide in wider financial markets.

While the Yemeni Houthi group claimed responsibility for the attack, a senior US official indicated Iran was behind it.

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

"This is the biggest geopolitical flashpoint to impact the world marketplace in quite some time ... Sharply higher oil prices may throw a monkey wrench into central banks' monetary policies, which had heretofore been leaning very easy," Jim Wyckoff, senior analyst with Kitco Metals, wrote in a note.

Central banks globally face increasing pressure to dole out monetary support for flagging economies as the US-China trade war hurts trade and business sentiment.

Markets are awaiting policy decisions from the US Federal Reserve and Bank of Japan on Wednesday.

Lower US interest rates put pressure on the dollar and bond yields, increasing the appeal of non-yielding bullion.

Meanwhile, data from China showed growth in industrial production slipped to its lowest level in 17-1/2 years amid the spreading pain from a trade war.

However, a 0.4 percent rise in the dollar made gold more expensive for holders of other currencies, limiting bullion's advance.

Platinum and palladium are reacting to the jump in crude prices since both metals are used not just as autocatalysts, but also to crack crude oil into heating oil and gasoline, said RBC Wealth Management's Gero.

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