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Risk aversion sentiment continues to tick up boosting gold

Risk aversion continues to tick up as we reach the end of the week with simmering geopolitical tensions causing jitters across the board. These tensions are giving the gold bulls a push of momentum, with the yellow metal set to end the week on a high as prices continue to rise.

Driving the nervousness amongst investors is the growing war of words between China and Russia, which some fear could spill over into military acts of aggression.

The discontent between the two nations has sparked into life once again this week as a result of US House Speaker Nancy Pelosi’s visit to Taiwan – something which China has seen as US interference. Beijing has reacted furiously to the visit, which saw Pelosi become the highest ranking US official in 25 years to step foot on the island. Despite a civil war which saw the two countries split in 1949, China still considers Taiwan to be part of its sovereign territory, and it has issued a strongly worded warning to Washington.

The US visit has seen China conduct live-fire drills in the seas around Taiwan, with fighter jets also scrambled. As a result, there has been a noticeable increase in risk off sentiment, a hesitation which has quickly benefitted gold. It finally surged above the important £1,482 ($1,800) threshold once again on Thursday trading. The yellow metal added more than £27 ($30) through the day, reaching a daily high of £1,489 ($1,808).

Chief market analyst Han Tan says the messaging coming out of China is helping the gold bulls to harness momentum, “The aggressive tone emanating out of Beijing in response to Pelosi’s visit to Taiwan has made for a classic safe haven play in recent sessions, with gold and Treasuries rising in tandem with the U.S. dollar and the Japanese Yen.”

Bloomberg Intelligence’s Mike McGlone added that gold now appears to be firmly on the increase and is set to continue to gain strength rather than dip back down to recent levels. He said, “Gold appears more likely to resume its enduring upward trajectory and breach resistance at around £1,648 ($2,000) an ounce vs. sustaining above £1,401 ($1,700) support. The most aggressive Fed tightening in 2022 since the 1980s has contained gold, and it’s a matter of time before rate hikes subside, letting the metal resume its path of least resistance upward.”

Buy now before the gold bulls take off to record new highs.

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