According to Reuters, gold prices increased by more than 1% to reach a new one-month high on August 4. As of early August 5, spot gold had surged to its highest level since July 5 and was up 1.6% to 1,793.34 dollars per ounce. The price of American gold futures increased 1.89% to 1,810.90 dollars per ounce.
One of the boosts in gold prices comes from the recent manifestation of the geopolitical tension linked to House Speaker Nancy Pelosi’s Taiwan visit.
David Meger, director of metals trading at High Ridge Futures, said, “We’ve seen some rising tensions between the U.S. and China, so one additional reason why gold has been well supported coming into the morning.”
Responding to the high-profile trip that it protests vehemently, China has conducted its largest-ever military exercises in the Taiwan Strait. Multiple Chinese missiles started launching close to the self-ruling island on August 4.
When there are economic and geopolitical concerns, gold is regarded as a secure store of value and normally performs well when interest rates are limited or near zero.
Gold values have been on the rise for days. As Reuters reported earlier, on the day Pelosi set foot in Taiwan on August 2, U.S. gold futures ended the day at 1,789.7 dollars.
Gold also gained an advantage from the pullback in the dollar and U.S. Treasury yields. This attracted foreign buyers while lowering the opportunity cost of storing non-yielding bullion.
Meger said, “As of late, yields are coming down slightly. That has been along with the dollar’s recent weakness, one of the key benefits to gold.”
As Bloomberg reported, Craig Erlam, a senior analyst at Oanda Corporation, said fears of a recession might also help bullion since they may prompt a safe-haven mentality. Erlam is also looking for a potential push toward 1,800 dollars.