Gold prices rise as U.S.-China tensions resurfaceGold prices rise as U.S.-China tensions resurface
A customer tries on gold bracelets at Caibai Jewelry store in Beijing

By K. Sathya Narayanan

(Reuters) – Gold prices extended gains on Monday, having jumped more than 1% in the previous session, as rising tensions between the United States and China over the coronavirus’ origin bolstered bullion’s safe-haven appeal.

Spot gold gained 0.3% to $1,703.77 per ounce by 0752 GMT in thin trade as markets in China and Japan were closed for holidays. U.S. gold futures rose 0.9% to $1,715.20.

U.S. Secretary of State Mike Pompeo on Sunday said there was “a significant amount of evidence” that the coronavirus emerged from a Chinese laboratory, following President Donald Trump’s remarks on Friday that tariffs on China were “certainly an option” as he considers ways to retaliate for the outbreak.

“Some sort of fears are there that the trade war might be ignited and such events are good for gold. All these comments from officials indicate a new round of hostility as far as the trade is concerned with China,” said Avtar Sandu, a senior commodities manager at Phillip Futures.

Gold rose 18% last year as the Sino-U.S. trade dispute increased demand for the safe haven amid interest rates cuts by the U.S. central bank.

The Federal Reserve has kept interest rates at near zero, with other central banks and governments taking similar measures to cushion their economies from the impact of the pandemic.

The widespread fiscal and monetary impetus will support bullion in the longer term as it is often seen as a hedge against inflation and currency debasement, analysts said.

However, “U.S. dollar demand is competing for safe-haven lustre in Asia this morning,” said Stephen Innes, chief market strategist at financial services firm AxiCorp, in a note.

The dollar <.DXY> moved away from an over one-month low on Monday, making gold costlier for investors holding other currencies and limiting bullion’s upside.

On the macro front, investors were awaiting U.S. jobs report for April due on Friday.

“Beyond the rhetoric from Washington we would expect gold to consolidate until the non-farm payrolls figures are out. A decline in the (unemployment) numbers wouldn’t be good for gold prices,” Phillip Futures’ Sandu said.

Reflecting an appetite for gold, holdings in the world’s largest gold-backed exchange-traded fund, SPDR Gold Trust, rose 1.1% to 1,067.90 tonnes on Friday.

Palladium rose 0.7% to $1,913.33 per ounce, while platinum gained 0.1% to $761.19. Silver was up 0.1% to $14.96.

(Reporting by K. Sathya Narayanan in Bengaluru; Editing by Amy Caren Daniel, Aditya Soni)