Gold rises on stimulus optimism, renewed US-China tensions

Gold rose on Friday to hover below a three-week high hit in the previous session, underpinned by talks of further US stimulus and worsening US-China relations.

FUNDAMENTALS
Spot gold gained 0.1% to $1,730.56 per ounce by 0142 GMT, having touched a three-week high of $1,735.96 on Thursday. US gold futures climbed 0.1% to $1,742.30.


The metal has gained about 1.8% so far this week.

Asian stocks were set to rise amid optimism about the re-opening of the US economy from coronavirus lockdowns and possibly more stimulus that could fuel a recovery.

US President Donald Trump is open to negotiations on another possible stimulus bill amid the pandemic, but not the one put forward by House of Representatives Democrats, a White House spokeswoman said.

Gold tends to benefit from widespread stimulus measures as it is often seen as a hedge against inflation and currency debasement.

Trump also signalled a further deterioration of his relationship with China over the virus, saying he has no interest in speaking to President Xi Jinping right now and going so far as to suggest he could even cut ties with Beijing.

Underscoring the economic impact of the epidemic, initial claims for state unemployment benefits in the United States totalled a seasonally adjusted 2.981 million for the week ended May 9, but have been gradually decreasing since hitting a record 6.867 million in the week ended March 28.

British manufacturers think it will take longer to recover from the economic impact of COVID-19 than just a couple of weeks ago, according to an industry survey.

The Bank of England is not considering taking "the very big step" of pushing interest rates below zero, Governor Andrew Bailey said.

SPDR Gold Trust holdings, the world's largest gold-backed exchange-traded fund, rose 1.15% to 1,104.72 tonnes on Thursday.

Palladium gained 0.3% to $1,840.42 an ounce, but was on track to post its seventh straight weekly loss. Platinum eased 0.1% to $767.29, while silver rose 0.7% to $15.97.