Gold inches higher as jittery investors seek safe havens
‘I strongly believe the market is underpricing the potential for equity markets to derail. This is a key hedge for gold in my view’
Bengaluru — Gold prices edged higher on Tuesday, drawing some safe-haven bids from nervous investors.
The mood turned risk-averse as Asian stocks fell amid concern about a potential slowdown in China’s economic growth and as the dollar eased against the yen.
Spot gold was up 0.3% at $1,190.65 an ounce at 3.55am GMT. On Monday it fell 1.2%, its biggest one-day percentage fall since August 15, and also touched a more than one-week low of $1,183.19.
US gold futures rose 0.5% to $1,194.40 an ounce.
“Gold is getting some support from bargain hunting and also some safe-haven support on concerns of a potential sell-off in equities,” said Stephen Innes, Asia-Pacific trading head at Oanda in Singapore.
“I strongly believe the market is underpricing the potential for equity markets to derail. This is a key hedge for gold in my view.”
Asian shares hit 17-month lows on Tuesday as China allowed its currency to slip past a psychological bulwark amid sharp losses in domestic share markets, a shift that pressured other emerging market currencies to depreciate to stay competitive.
The dollar slipped against the yen in Asia on Tuesday on simmering anxiety about higher US bond yields, the China-US trade war and political turmoil in Europe.
Meanwhile, the International Monetary Fund on Tuesday cut its global economic growth forecasts for 2018 and 2019, saying trade policy tensions and imposition of import tariffs were taking a toll on commerce, while emerging markets struggle with tighter financial conditions and capital outflows.
Gold has held in a $34 range for the past month-and-a-half, which some analysts say suggests resilience. Fear over the damage to emerging market economies from higher US interest rates has spurred safe-haven bidding.
“The current political and economic climate will lead to people buying the dollar but after the dollar, gold is the next preference,” said Peter Fung, head of dealing at Wing Fung Precious Metals in Hong Kong.
“Today there is some short-covering and we also see some fresh buying interest due to lower prices.”
Spot gold may end its weak bounce below a resistance at $1,193 an ounce, and then retest a support at $1,184, as suggested by a projection analysis, according to Reuters technical analyst Wang Tao.
Gold has fallen more than 13% from a peak in April, largely due to the dollar’s strength, which reflects a vibrant US economy, rising US interest rates and trade tensions.
Among other precious metals, spot silver gained 0.5% to $14.41, platinum inched up 0.2% to $819.15 an ounce, and palladium was up 0.1% at $1,076.