Gold inches higher as Asian stocks falter
Bengaluru — Gold prices edged higher on Tuesday as Asian stocks faltered, weighed down by political tension between Saudi Arabia and western powers, uncertainties around Brexit and Italy’s budgetary woes.
Spot gold was up 0.2% at $1,223.66/oz at 4.19am GMT. US gold futures rose 0.2% to $1,226.5/oz.
“Geopolitical tensions are escalating and that has brought some safe-haven buying back into the gold market.… Short positions also appear to be unwinding as a result,” ANZ analyst Daniel Hynes said.
Asian shares fell as earnings season nerves in the US dented Wall Street and the mix of political and economic concerns dampened sentiment. MSCI's broadest index of Asia-Pacific shares outside Japan dropped 1.7%.
Gold is used as an alternative investment during times of political and financial uncertainty.
The fast pace of short-covering in the past fortnight has helped lift gold prices, with volatility in risk assets, and continued fears over a trade war strengthening demand, according to Jordan Eliseo, chief economist at gold trader ABC Bullion.
“Fears over a slowdown in global growth may also support the metal, especially if markets get a sense that the US Federal Reserve may slow their pace of tightening, with the potential for substantially more short-covering in the weeks ahead,” Eliseo said.
The outlook for global growth in 2019 has dimmed for the first time, according to Reuters polls of economists who said the US-China trade war and tightening financial conditions would trigger the next downturn.
The yellow metal has declined more than 10% from its April peak after investors preferred the dollar as the US-China trade war unfolded against a background of higher US interest rates.
Spot gold looks neutral in a range of $1,217/oz-$1,235/oz, and an escape could suggest a direction, said Reuters technical analyst Wang Tao.
Meanwhile, holdings at the world's largest gold-backed exchange-traded fund (ETF) SPDR Gold Trust rose 0.28% to 747.88 tons on Monday.
Palladium eased 0.5% to $1,116.55/oz, after hitting a nine-month high of $1,124.40 in the previous session.
Palladium surged nearly 4% on Monday as investors were worried about the effect of any renewed sanctions on Russia, a major producer of the metal, ANZ analysts said in a research note.
“Plans by the US to pull out of a nuclear weapons pact treaty with Russia could ultimately impact palladium sales at a time when the market is extremely tight,” said ANZ analysts.
Among other precious metals, silver was down nearly 1% at $14.48/oz.
Platinum fell 0.1 percent to $819.10/oz.