Gold was down in London’s trading session on Monday morning, burdened by the rising U.S.-China tensions that have continued to weaken demand for even the safe-haven asset.
Gold futures dropped by 0.47% at $1,728.23 on Monday by 14.00 pm local time, with the commodity unable to hold most of its gains from the previous session.
Why is gold so important?: Gold has unique physical properties that make it very valuable. It is the most ductile and malleable of all metals. Consequently, investors use it to hedge against paper money (inflationary fundamentals).
In addition, the friendship between the Americans and Chinese has soured, since the outbreak of the Covid-19 pandemic. President Trump and President Jinping of China have traded words against each other as a result of issues surrounding the pandemic. These include accusations of lack of transparency as well as claims of cover-ups.
There have also been fears over rising tensions between America and China over Beijing’s plans to begin security laws on Hong Kong, and America’s planned sanction against China.
Towards China’s plan to impose national security laws on Hong Kong, protests had sprung up leading to the use of cannons and tear gas yesterday by the Hong Kong police to disperse its citizens.
“The HK security legislation packs on a hefty amount (of) trade war risk premium,” said Stephen Innes, chief market strategist at AxiCorp, noting that it added to market worries last week about the level of Chinese policy stimulus.