U.S.-Sino Tensions Hit Stock Market; Gold and Silver Soar
The euro traded at an 18-month high on Wednesday as financial market continued to bask in the afterglow of the EU recovery fund agreement deal, while a precious metals boom took silver’s recent gains to 20% and gold to a nine-year high.
News from China that the United States had told it to close its consulate in Houston caused a bout of risk aversion in European trading, but stock market had been consolidating anyway after their recent surges.
Asian stocks had spent most of the day dithering and Europe’s morning dip added to the list of gyrations keeping traders occupied.
Silver gained 5% to a six-year high of $23 per ounce before profit-taking struck. Gold’s high of $1,865 an ounce took its gains this month to nearly 20%.
The euro was perched above $1.15 for the first time since early 2019, and despite a minor tick up on the Houston headlines the dollar was at its lowest against a basket of the main world currencies since March.
“With the U.S. struggling with the pandemic, there is a growing divergence of growth expectations with Europe and Asia Pacific,” said RBC analyst Alvin Tan to Reuters.
“We’ll keep an eye on what is happening in Houston, but the fact is that in a typical up-cycle for the global economy the dollar tends to underperform, of course”.
China’s foreign ministry spokesman Wang Wenbin told a regular daily news briefing that the United States had abruptly told Beijing on Tuesday to close its consulate.
“We urge the U.S. to immediately revoke this erroneous decision,” he said. “Should it insist on going down this wrong path, China will react with firm countermeasures.”
China’s offshore yuan weakened past 7 per dollar on the news and was last at 7.0028. The dollar index inched up 0.2% from March lows it had hit on Tuesday.
“That headline triggered some profit taking, quite an aggressive one in USDCNY, USDCNH,” said Christy Tan, head of markets strategy for Asia at National Australia Bank in Singapore.
“It’s a timing issue. All this is coming as tensions between the U.S. and China are escalating. This added fuel to fire,” she said.
Neha writes articles on sectors including medicine, food, materials, and science & technology. A qualified statistician, she has the ability to observe and analyze the trends in global markets and write compelling articles that help CXOs in decision making. She is a bookworm and loves to read fiction, lifestyle, science and technology. Neha comes with 6 years of experience in content writing and editing that involves blog writing, preparation of study materials and OERs.