Gold prices headed higher on Friday as testiness between the U.S. and China drew investors into assets considered havens, including government debt and the Japanese yen.
However, continuing plans to reopen economies that have been frozen by the COVID-19 pandemic and hope for remedies has limited the upside in precious metals, experts said.
“The heightened uncertainties in the markets are causing further ventures into riskier waters to pause for breath, after what has been a bumpy ride for risk assets this week,” wrote Han Tan, market analyst at FXTM, in a Friday research note.
“Gold is climbing back towards the $1730 handle and the Yen is advancing against all of its G10 and Asian peers,” he wrote.
Gold for June delivery on Comex was up $14, or 0.8%, at $1,735.90 an ounce, after the yellow metal dropped 1.7% on Thursday marking its first decline three sessions.
Meanwhile, July silver was picking up 9 cents, or 0.5%, at $17.455 an ounce, after falling 3.7% in the previous session.
For the week, bullion is looking at a 1.1% weekly decline, while silver is on pace for 2.1% gain based on last Friday’s settlements for the most-active contracts.
Elevated tensions in Asia were reflected in a sharp 5.6% tumble in Hong Kong’s Hang Seng, the worst day since July 2015, coming as China moved to impose new national-security laws on the city.
China’s proposed laws would challenge the semiautonomous country’s governance and appeared to draw a swift rebuke from the U.S. The Wall Street Journal on Thursday reported that U.S. senators were introducing a bipartisan bill that would sanction Chinese officials and entities who enforce the new Hong Kong laws, and penalize banks that do business with the entities.
“Traders around the world are playing the waiting game to see details of the new Hong Kong law to gauge how severe the terms are,” Stephen Innes of AxiCorp said in a commentary.
The bill proposal comes amid heightened friction between the Trump administration and the China, with Beijing being blamed for mishandling the coronavirus, which was first identified in Wuhan in December and has infected more than 5.1 million people globally.
Against the backdrop, safe-haven assets, including the 10-year Treasury note have been drawing bids, pushing prices for government paper up and yields lower. The 10-year note was most recently yielding 0.644%, compared with 0.677% Thursday afternoon. Lower yields can also help push investors into bullion which doesn’t offer a yield.
Meanwhile, the yen was up 0.2% against the U.S. dollar changing hands at 107.46, but the buck overall was gaining 0.4% versus a basket of a half-dozen rival currencies, including the yen, as gauged by the ICE Dollar Index. A stronger dollar can cap gains in asset priced in the monetary unit like gold because it makes them more expensive to buyers using other currencies.