Gold gains after dismal data fans risk-off sentiment
The metal rises as eurozone data adds to concerns of a slowdown in global growth and sends investors in search for safe-haven assets
Bengaluru — Gold prices rose on Friday as disappointing economic data from the eurozone added to concerns of a slowdown in global growth and drove investors away from riskier assets.
Spot gold was up about 0.3% at $1,312.37/oz by 11.56am GMT, while US gold futures gained 0.4% to $1,312.
“It is about the weakness in the economy in the eurozone and outlook for interest rates which makes holding gold more attractive,” said Quantitative Commodity Research analyst Peter Fertig.
Businesses across the eurozone performed much worse than expected in March as factory activity contracted at the fastest pace in nearly six years, hurt by a big drop in demand, a survey showed.
“The data … was weaker than the consensus. This is weighing on interest rates in the eurozone and bond yields,” Fertig said.
Germany’s benchmark 10-year government bond yield turned negative for the first time since October 2016, while European stocks wiped out early gains after the data was released.
Gold prices rose to their highest since February 28 on Thursday at $1,320.22. Despite paring some of those gains, they were still on track for a third consecutive weekly gain, up about 0.9% so far.
“Gold could not break above $1,320 on the upside and saw a correction. The current trading range seems to be between $1,305-$1,320,” said Afshin Nabavi, senior vice-president at MKS.
“I still believe that with the geopolitical and the (uncertain) Brexit situation, we may be heading higher.”
EU leaders have given Prime Minister Theresa May a two-week reprieve, until April 12, before Britain could lurch out of the EU if she fails to persuade MPs to back the withdrawal treaty she concluded with Brussels.
Also capping prices was the Fed’s decision earlier this week to bring its three-year drive to tighten monetary policy to an abrupt end, abandoning projections for any interest rate hikes in 2019.
Lower interest rates reduce the opportunity cost of holding nonyielding gold and weigh on the dollar.
Among other precious metals, silver was down 0.2% to $15.44/oz.
Platinum fell 0.1% at $857.59/oz while spot palladium dipped about 1.2% to $1,590/oz, after touching a record high of $1,620.53 in the previous session.
Concerns about a deep supply deficit and increased speculative buying interest have pushed palladium prices to record levels, analysts said.
Both the autocatalyst metals, palladium and platinum, are up about 3% so far this week.