Gold rises as investors unwind bearish positions
Tension between Saudi Arabia and western nations and potential divisions in Europe are also helping bullion
Bengaluru — Gold rose on Tuesday as investors unwound some bearish positions after prices jumped to a two-and-a-half-month high in the previous session, driven by a global equities sell-off.
Spot gold was up 0.2% at $1,229.34/oz by 11.09am GMT, having peaked on Monday at $1,233.26, its highest since July 26.
US gold futures were up 0.2% at $1,232.70.
“Gold is still holding the gains, very close to the 100-day moving average. A close above that level could be a positive sign and provoke more short-covering and push prices higher,” said Commerzbank analyst Carsten Fritsch.
Speculators who trade on technical signals regard a break above the 100-day moving average as a bullish sign.
Data last week showed that speculators had increased their short positions and traders said the recent rally forced many to abandon those bets on lower prices.
Tension between Saudi Arabia and western nations, plus potential divisions in Europe over Italy's budget, was also helping gold, Fritsch said.
The stock markets are still fragile and there are warnings that we could see further losses. Any increases in stock markets are being used as a selling opportunity. On that front there is lot of room for gold to rise furtherCarsten Fritsch
Global equities edged higher after sharp declines over the past couple of days, but gains were capped as markets remained nervous because of factors including the US-China trade tussle, tension between Saudi Arabia and western powers, stalled Brexit negotiations and concerns over China's economy.
“The stock markets are still fragile and there are warnings that we could see further losses,” Fritsch said. “Any increases in stock markets are being used as a selling opportunity. On that front there is lot of room for gold to rise further.”
Gold, usually viewed as a safe store of value during political and economic uncertainty, has fallen nearly 10% from its April peak as investors largely turned to the dollar as the US-China trade war unfolded against a background of higher US interest rates.
Julius Baer analyst Carsten Menke, who agreed that gold’s gains since the middle of last week have mostly been driven by short-covering, said prices are likely to move sideways or up slightly.
Holdings of the largest gold-backed ETF, SPDR Gold Trust , rose nearly 2% last week. That was its biggest weekly inflow since January, with the fund having registered declines of more than 4-million ounces since hitting a peak in late April. Holdings rose 0.6% to 748.76 tons on Monday.
In other metals, silver rose 0.7% to $14.76/oz.
Platinum was up 0.6% at $843.50 after touching its highest since July 10 at $850.10 on Monday. Palladium was flat at $1,083.10.