July 23, 2020 / 10:23 AM / 12 days ago

PRECIOUS-Gold hits nine-year high on U.S.-China tensions

    * Holdings in SPDR Gold Trust rose 0.4% on Wednesday
    * UBS sees palladium prices reach $2,500/oz by mid-2021
    * GRAPHIC-2020 asset returns: tmsnrt.rs/2jvdmXl

 (Updates prices)
    By Eileen Soreng
    July 23 (Reuters) - Gold rose for a fifth straight session
on Thursday, hitting a nine-year high as escalating tensions
between the United States and China increased its safe-haven
    Spot gold        was up 0.4% to $1,878.76 per ounce at 1141
GMT, having hit its highest since September 2011 at $1,888.26.
U.S. gold futures        rose 0.6% to $1,876.70.
    "Gold as store of value has significantly enhanced so it
wouldn't be a surprise if it rises to $1,900," Bank of China
International analyst Xiao Fu said.
    Geopolitical risks, worries about further tensions between
Washington and Beijing and ample liquidity from widespread
central bank stimulus measures are driving prices, she added.
    The United States gave China until Friday to close its
consulate in Houston, Texas, following allegations of spying.
    Supporting bullion further, the dollar index        touched
a more-than four-month low.       
    Expectations of another round of U.S. stimulus measures also
helped gold, since it is considered a hedge against inflation
and currency debasement.             
    Indicative of investor sentiment, holdings in SPDR Gold
Trust      , the world's largest gold-backed exchange-traded
fund, rose 0.4% to 1,225.01 tonnes on Wednesday, the highest
since March 2013.             
    "Gold could overshoot much higher to the upside, but the
subsequent decline will be quite dramatic as well ... As more
economies reopen and return to normal activity, the economic
data improves then there will not be much need to pile up in
gold," Xiao said.
    Elsewhere, silver        fell 1.4% to $22.70 per ounce,
after rallying to a nearly seven-year high, spurred by hopes for
a revival in industrial activity.
    Palladium        declined 1.1% to $2,124.65 per ounce, while
platinum        fell 1.7% to $906.08. 
    Market tightness in the second half of 2020, supported by
monetary and fiscal stimulus measures, should support palladium
prices over the next 12 months, UBS said in a note, adding it
expected the auto catalyst metal to reach $2,500/oz by mid-2021.

 (Reporting by Eileen Soreng and Brijesh Patel in Bengaluru;
editing by Barbara Lewis and Mark Potter)
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