NEW YORK: Gold soared to a nine-year peak on Wednesday as an escalation in US- China tensions stoked demand for safety, while silver followed bullion's rally to hit a near seven-year high on hopes for a recovery in industrial demand.
Spot gold hit its highest since September 2011 in early trade at $1,865.35, and by 11:27 a.m. EDT (1527 GMT) rose 1% to $1,859.86 per ounce.
US gold futures were 0.7% higher at $1,856.90 per ounce.
"Gold is accelerating higher and that's been mainly on the geopolitical tensions with China. There seems to be no end in sight for this escalation ... and it's going to damage sentiment as the world's largest countries continue to bicker," said Edward Moya, senior market analyst at broker OANDA.
The United States ordered China to close its consulate in Houston, while a source said Beijing was considering shutting the US consulate in Wuhan in retaliation.
The tit-for-tat between the two countries is likely to further deteriorate the global economic outlook as it reels under the impact of the pandemic.
Low interest rates and a wave of stimulus to cushion economies against the coronavirus pandemic has propelled prices of bullion, widely used as an insurance against rising uncertainties, 22.6% higher so far this year.
Silver rose 4.5% to $22.30 per ounce, having earlier hit its highest since October 2013 at $23.02.
Prices have risen around 15.8% so far this week, which some analysts see as the start of a bull run powered by low interest rates, resurgent investment demand, disrupted production and a recovery in industrial consumption.
"Silver spot prices have outperformed gold so far this month, an interesting reversal of the norm," said Cailin Birch, global economist at the EIU.
The approval of the EU stimulus package and steadily improving economic and industrial activity in China, the main source of demand growth of industrial metals, has contributed to this recent optimism, Birch added.
Palladium fell 0.5% to $2,148.25 per ounce and platinum rose 2.5% to $904.09 per ounce, having hit its highest since Feb. 27 at $912.97 earlier.
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