S&P 500<\/a>\u2032s 14.3% year-to-date gain.<\/p>\n\n\n\nInvestors turned to gold at a time when the amount of debt trading at negative yield increases. Currently, there is $15 trillion worth of bonds with negative rates. This makes gold more attractive since it retains its value even in times of slower economic growth.<\/p>\n\n\n\n
Concerns over the global economy come as the U.S.-China trade war intensified with Chinese authorities allowing the country\u2019s currency, the yuan, to depreciate against the dollar while several central banks around the world cut interest rates.<\/p>\n\n\n\n
\u201cThat is the biggest factor because it introduces a whole new set of risks to the equation,\u201d said Ryan Giannotto, director of research at GraniteShares. \u201cWhat\u2019s really playing into people\u2019s fears is does the depreciation of the yuan signify a larger threat to the economy.\u201d<\/p>\n\n\n\n
On Monday, China allowed the yuan to weaken beyond 7 per U.S. dollar, marking the currency\u2019s lowest level against the greenback in more than a decade. That move led to Wall Street\u2019s biggest sell-off of 2019. The People\u2019s Bank of China initially quelled escalation fears on Tuesday by pegging the yuan at a stronger-than-forecast level relative to the dollar. However, those worries reemerged after China set the yuan at a weaker-than-expected rate.<\/p>\n\n\n\n
China\u2019s currency moves came after President Donald Trump announced last week a 10% tariff on an additional $300 billion worth of Chinese goods. Investors are fearful about the tariff because the goods being targeted include consumer products ranging from apparel to Apple products like the iPhone.<\/p>\n\n\n\n
Trade tensions have helped gold surge this month while stocks have lagged. The precious metal is up more than 5% in August. The S&P 500, meanwhile, has dropped more than 4%.<\/p>\n\n\n\n
\u201cAlthough gold futures remain near-term overbought, momentum is decidedly higher,\u201d said Tom Essaye, founder of The Sevens Report, in a note. \u201cFundamentally, the sharp downtrends in bond yields firmly support the bullish case for gold.\u201d<\/p>\n\n\n\n
Concerns about the economy have also lifted gold prices while global yields fell.<\/p>\n\n\n\n
Central banks in New Zealand, India and Thailand all cut interest rates overnight. New Zealand reduced its overnight rate by 50 basis points while India lowered its rate by 35 basis points. Thailand cut rates by 25 basis points.<\/p>\n\n\n\n
The three central banks cited weaker economic growth in one way or another. India\u2019s central bank noted inflation growth was mild and needed to boost the country\u2019s economy. New Zealand\u2019s central bank said lower rates were \u201cnecessary to continue to meet its employment and inflation objectives. \u201d The Thai central bank said it expected economic growth to slow.<\/p>\n\n\n\n
The U.S. 10-year note yield fell to its lowest level since 2016, briefly dipping below 1.6%. In Germany, the 10-year bund hit a record low, reaching negative 0.6%.<\/p>\n\n\n\n
\u201cThe flight to safety has continued across global financial markets,\u201d said Ken Berman, CEO of Gorilla Trades. \u201cBulls are hoping that the recovery that started yesterday will continue, but volatility is likely to remain elevated.\u201d<\/p>\n\n\n\n
Jeffrey Gundlach, CEO of Doubleline Capital, sees further gains for the precious metal moving forward as yields keep falling.<\/p>\n\n\n\n
\u201cAt this point, I think the way to think about it is, as long as the volume of negative interest rate bonds outstanding increases, it\u2019s quite likely that gold moves higher in a similar vein,\u201d Gundlach told Yahoo Finance.<\/p>\n\n\n\n
Source: CNBC<\/a>
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