By Joe Wallace
Gold prices climbed Friday as mounting concerns about the health of China's economy hit riskier commodities and tensions in the Middle East pushed investors into haven assets.
Gold futures for August delivery, the most-actively traded U.S. contract, increased 0.1% to $1,344.50 a troy ounce, paring gains after trading at the highest level since April 2018.
The rise accelerated after the National Bureau of Statistics released figures showing that Chinese industrial production grew at its slowest pace in 17 years in May, adding to fears that Beijing's efforts to stimulate growth are faltering in the face of trade frictions with the U.S.
"Industrial metals are down and gold is rallying -- it's all part of the same picture," said Carsten Menke, a strategist at Swiss private bank Julius Baer. "The efforts by the Chinese government, by various measures from fiscal policy to monetary policy, haven't yet been hugely effective."
Friday's move continued a strong run for gold. The precious metal notched its 12th daily rise in 13 trading days as investors bet the slowdown in the world economy was hurting growth in the U.S. and would lead the Federal Reserve to lower interest rates.
Gold, which has rallied 5% this year, becomes more attractive to investors when yields on interest-paying assets like government bonds fall.
However, a stronger dollar counteracted some of the appeal, as gold is priced in dollars and becomes more expensive to other currency holders when the greenback rises. The WSJ Dollar Index was up 0.4% Friday.
The latest leg in the rally came as stock markets slipped in Europe and Asia and government bond yields fell across the board. The yield on 10-year U.S. Treasurys slipped to 2.093% on Friday, from 2.096% on Thursday. Yields fall as bond prices rise.
Copper and other industrial metals, which are highly sensitive to Chinese demand, declined while oil prices rose in response to the attack on two tankers in the Gulf of Oman on Thursday. The Swiss franc and Japanese yen, also seen as havens, both rose.
Money managers have ramped up bets on gold since late April, when they were mostly wagering that its price would fall. Speculative investors held 156,718 more long contracts than short contracts as of June 11, according to the latest data from the Commodity Futures Trading Commission.
Some market participants said this bullish positioning leaves gold vulnerable, especially if President Trump and his Chinese counterpart, Xi Jinping, make progress on trade at the G-20 summit in late June and if the Fed doesn't cut interest rates in July.
"It's all about the dollar, it's all about the Fed, it's all about rates, " said David Govett, manager of foreign-exchange and precious metals at London-based broker Marex Spectron. On balance, he thinks the Fed is more likely to keep interest rates on hold than cut them.
But other analysts think gold could have further to go as long as tensions between the U.S. and China are running high. "It's been holding really well and as long as trade tensions are in the background it will continue to be well supported," said Joni Teves, a precious-metal strategist at UBS Group.