Picture: ISTOCK
Picture: ISTOCK

Bengaluru — Gold prices edged lower on Friday, but held near a more than 10-week high hit in the previous session when the metal breached a key resistance level, stoking optimism about an uptick in prices.

Spot gold was down 0.3% at $1,219.67 an ounce, as of 4.28am GMT, after the bullion jumped about 2.5% on Thursday, its sharpest gain since June 2016, as a rout in equities sent investors rushing to safe havens.

US gold futures were down 0.4% at $1,223.20 an ounce.

“The sinking of global markets has led people to seek gold as a safe haven. However, in Asian hours today we have seen some profit-taking,” said Peter Fung, head of dealing at Wing Fung Precious Metals in Hong Kong.

“With prices breaking the resistant $1,200 level and also crossing $1,225, it could be a signal that gold market is on the upside. Especially, given that during November and December we also see increased physical buying.”

Asian shares appeared tentative on Friday, holding steady after a nine-session losing streak, but sentiment was frail after Wall Street shares crumbled and expectations of market volatility shot up to an eight-month high.

“Further declines in stocks will put pressure on gold speculators to square up initially, and since gold speculative (managed money) shorts outweigh longs, that implies short-covering,” said Nicholas Frappell, global general manager at ABC Bullion, Australia.

“Whether gold is really the beneficiary of a flight to safety is harder to say than it looks, because it is more likely that large shorts are de-risking their positions and substantial exposure to a price rally, which is not the same as fresh funds flowing in.”

Gold has fallen more than 10% from a peak in April, with investors increasingly switching to the safety of the greenback as the US-China trade war unfolds against a backdrop of rising US interest rates.

But prices have recovered from a one-and-a-half-year low of $1,059.96 hit in mid-August, propped up by limited safe-haven buying at lower levels linked to concerns over economic growth and inflationary pressure from soaring oil prices.

Spot gold may extend its gains to $1,237 an ounce, as suggested by a Fibonacci ratio analysis, according to Reuters technical analyst Wang Tao.

Spot gold has gained about 1.5% this week, heading for its best weekly performance in seven.

Meanwhile, palladium was up 0.3% at $1,080.25, after hitting its highest since January 26 at $1,096.80 in the previous session.

Silver was little changed at $14.56, while platinum was hovering near a more than two-month high of $843.90 marked in the previous session.