Gold benefits as risk-averse investors search for safety
Bengaluru — Gold prices held steady on Wednesday, after rising the most since January 9 the day before, on demand for safe-haven assets amid concern over the slowing global economy along with uncertainty about the trade dispute between the US and China.
Spot gold was little changed at $1,284.74/oz by 3.45am GMT, while US gold futures were up 0.1% at $1,284.20/oz.
Spot gold rose 0.4% on Tuesday as global stock markets fell. Asian stocks dipped further on Wednesday.
“Macro fundamentals data has been pretty disappointing.… There is a sudden surge in absurdities surrounding the US-China trade talks. All this data and trade uncertainties are fuelling demand for safety,” said Margaret Yang, market analyst at CMC Markets.
However, a lack of significant movement in Asian equities was limiting gold’s gains, Yang added.
Gold is often used as a hedge against political and economic uncertainty.
“As the risk sentiment is biased towards the bearish side, based on all this data, gold will have more room to go up and potentially challenge the resistance of $1,290-$1,295,” Yang said.
Disappointing economic data from the US and Japan added to the sense of an overall slowdown. US home sales tumbled to their lowest in three years in December, data on Tuesday showed. Meanwhile, Japan export data released on Wednesday fell short of expectations.
Additionally, Financial Times said that the US rejected a Chinese offer for preparatory trade talks this week ahead of high-level negotiations scheduled for next week. White House economic adviser Larry Kudlow denied the report.
Also supporting gold was a prolonged partial US government shutdown and expectations that the Federal Reserve will hold its multiyear rate hike cycle, analysts said.
Higher interest rates tend to reduce the appetite for nonyielding bullion.
Political uncertainty remains high, with Prime Minister Theresa May’s Brexit deal still struggling to find support, aiding gold, ANZ analysts said in a research note.
Reflecting investors’ appetite for gold, holdings of the SPDR Gold exchange-traded fund (ETF), the largest gold-based ETF, was at its highest since June 2018.
Spot gold may break a support at $1,279/oz and fall to the next support at $1,268, as suggested by its wave pattern, a projection analysis and a rising trendline, according to Reuters technical analyst Wang Tao.
Elsewhere, palladium, which hit a record high of $1,434.50/oz last week on low inventories and rising demand, fell for a fourth session, dropping 0.5% to $1,339.
Platinum rose 0.4% to $791.
Silver, meanwhile, rose 0.2% to $15.36/oz.