Gold bounces back as global growth worries weigh on stocks
Spot gold is up 0.3% as platinum recover from its lowest rate in nearly three weeks, and palladium slips 1.4%
Bengaluru — Gold bounced back on Tuesday from multi-week lows touched in the previous session as mounting concerns of an economic slowdown exacerbated by a cut in the International Monetary Fund’s (IMF) global growth forecast drove investors to the safety of bullion.
Spot gold was up 0.3% to $1,283.50 an ounce at 11.31 GMT, recovering from a dip to its lowest since December 28, at $1,276.31, on Monday. US gold futures were little changed at $1,282.80.
“Gold and safe-haven demand are in a stable relationship ... There is a bit of risk-off sentiment” said ABN AMRO analyst Georgette Boele, adding that weakness in European stock markets and lingering doubts surrounding the US-China trade spat were supporting gold.
Pessimism about global growth weighed on global stocks after the IMF warned of a darkening outlook and China confirmed its slowest growth rate in nearly 30 years.
In its World Economic Outlook report, the IMF predicted the global economy would grow at 3.5% in 2019 and 3.6% in 2020, down 0.2 and 0.1 percentage point, respectivel,y from last October’s forecasts.
Gold held its own against gains in the dollar, with the greenback also sought as a refuge by investors concerned by the dampening global economic outlook. The metal was buoyed too by limited buying on the dips, analysts said.
“What we have positive for gold is that there is a renewed investment demand so the holdings of the physically pegged products continue to grow,” said Julius Bär analyst Carsten Menke.
Holdings of SPDR Gold, the largest gold-based exchange-traded fund (ETF), rose 1.5% on Friday to 809.76 tonnes.
Gold has risen more than 10% since touching one-and-a-half-year lows in mid-August, mainly due to tumultuous stock markets and a softer dollar.
Adding to gold’s appeal, US Federal Reserve officials have left little doubt that they want to stop raising interest rates, at least for a while. Higher interest rates tend to reduce appetite for non-yielding gold.
“On a 12-month horizon and then further out, we see more upside once the dollar starts to weaken, as more investment demand comes back into the market, especially after we get clear evidence that the global economy is slowing down,” Menke added.
On the technical front, spot gold may fall to $1,268, as it has broken a support at $1,279 an ounce, according to Reuters technical analyst Wang Tao.
Meanwhile, spot palladium, which hit a record high of $1,434.50 last week driven by a sustained deficit and rising demand, slipped 1.4% to $1,343. It earlier touched $1,331, its lowest since January 16.
Silver rose 0.4% to $15.28 an ounce while platinum edged 0.1% higher to $792, recovering from its lowest since January 2, at $784, earlier in the session.