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Gold Prices Mark Fresh 6-Year Highs; Plunging Yields, Safe-Haven Demand Support

Investing.com - Gold prices jumped to fresh six-year highs on Tuesday as plunging bond yields worldwide further boosted the appeal of non-yielding bullion, while geopolitical tension in Hong Kong and Argentina supported demand for the safe-haven precious metal.

Gold futures for December delivery on the Comex division of the New York Mercantile Exchange, gained $7.35, or 0.5%, to $1,524.55 a troy ounce by 9:43 AM ET (13:43 GMT). Gold’s intraday high of $1,545.95 was its highest level since Sept. 2013.

Not unlike gold, U.S. bond markets have rallied amid risk-off sentiment, driving the yield on the 10-year Treasury note to levels not seen since 2016 and the 30-year yield towards all-time lows.

Investors have picked up bonds at the greatest rate since the 2008 global financial crisis, according to the latest Bank of America Merrill Lynch (NYSE:BAC) investor survey, that showed U.S. government bonds were the "most crowded" trade for the third straight month.

The flight to safety was not limited to U.S. debt as the yield on its German counterpart moved further into negative territory, hitting a new record low Tuesday.

Falling yields worldwide increase the appeal of gold by lowering the opportunity cost of holding the non-yielding asset.

Tensions in Hong Kong meanwhile remained on edge as the territory’s leader Carrie Lam said that further violence involving protests could push the territory “down a path of no return”. Analysts warned that the situation could escalate quickly if Beijing decides to act with military force, increasing demand for the safe-haven precious metal.

Adding to risk-off sentiment, the surprise defeat of President Mauricio Macri in Argentina’s primary elections over the weekend led to speculation that the country could once again be on the road to default.

“A casual glance around the global news outlets each day suggests many more reasons traders want to own gold than not,” Jeffrey Halley, market strategist at Oanda, said in a note. “I would expect this sentiment to continue, especially if China assumes someone new will be sitting in the White House in late 2020 - a very dangerous assumption.”

On the economic calendar, July inflation data for the U.S. showed a slightly stronger-than-expected reading, paring earlier gains in gold.

In other metals trading, silver futures gained 0.8% to $17.203 a troy ounce by 9:45 AM ET (13:45 GMT).

Palladium futures dropped 0.2% to $1,427.50 an ounce, while sister metal platinum lost 0.5% to $859.15.

In base metals, copper traded up 0.8% to $2.605 a pound.

-- Reuters contributed to this report.

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