PRECIOUS-Gold soars 2% as trade worries trigger flight to safety

* Chinese yuan falls below 7 per dollar to 11-year low
* GRAPHIC-World FX rates in 2019: http://tmsnrt.rs/2egbfVh

(Updates prices)
By K. Sathya Narayanan
Aug 5 (Reuters) - Gold surged 2% on Monday to its highest
level in more than six years as a worsening U.S.-China trade
conflict prompted investors to dump riskier assets for safe
havens, with a weaker dollar supplying additional fuel for
bullion's run.
Spot gold XAU= was up 1.7% at $1,464.72 per ounce as of
1:33 p.m. EDT (1733 GMT), after hitting its highest level since
May 2013 at $1,469.60. U.S. gold futures GCcv1 settled 1.3% up
at $1,476.50.
In the latest flare-up in a long-drawn trade spat, China on
Friday said it would fight a decision by U.S. President Donald
Trump to slap an additional 10% tariff on $300 billion worth of
Chinese imports. "What is driving gold is fear of these tariffs and the fear
of China retaliating," said Michael Matousek, head trader at
U.S. Global Investors. He added that a host of uncertainties
surrounding the global economy, an environment of negative bond
yields and an ongoing currency war were making the case for
gold.
"Gold is in a bull market and is going to trend higher. This
is just a start of another wave going up. I would not be
surprised to see gold hit the $1,500 level by November-December
and keep it sustained there."
Trump's tariffs on China may force the U.S. Federal Reserve
to cut interest rates more than it had hoped was necessary to
protect the economy from trade-related risks. "All this volatility, growth fears, persistent weakness in
economic data will be good enough for a risk-off environment,"
said Benjamin Lu, an analyst at Phillip Futures.
The dollar .DXY slipped to near a two-week low against key
rivals, making bullion cheaper for investors holding other
currencies, but rose against the Chinese yuan. Trade worries
also drove a sell-off in global stock markets. USD/
MKTS/GLOB
China let its yuan CNY=CFXS weaken below the
seven-per-dollar level on Monday, an 11-year low, while the
offshore yuan CNH=EBS fell to its weakest since international
trading of the Chinese currency began.
"This might encourage some more gold buying in China as a
weaker yuan means a stronger dollar, and gold provides you
exposure to the dollar, which makes gold attractive for the
Chinese," Julius Baer analyst Carsten Menke said.
The Shanghai Gold Exchange said it would raise the margin
requirement on its AU(T+N2) gold contract XAUTN2=SGEX . The
trading limit on the contract would also be raised. In India, gold imports for July plunged 55% from a year ago
to the lowest level in three years as local prices jumped to a
record high. Meanwhile, holdings in the world's largest gold-backed
exchange-traded fund, SPDR Gold Trust GLD , rose to 830.76
tonnes on Friday. GOL/ETF
Among other metals, silver XAG= rose 1.1% to $16.39 per
ounce. Platinum XPT= was up 1.4% to $854.49 per ounce, while
palladium XPD= rose nearly 1.3% to $1,424.06 per ounce.

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GRAPHIC-Gold's bull run https://tmsnrt.rs/2MGkxtA
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