Gold US coin. Picture: THINKSTOCK
Gold US coin. Picture: THINKSTOCK

Bengaluru — Gold held close to a more than six-year high on Wednesday, after rising more than 1% in the previous session, as fears of a possible recession and the trade conflict between China and the US drove investors to safe haven assets.

Spot gold was flat at $1,542.33 per ounce as at 12.22pm GMT. On Monday it touched $1,554.56, its highest since April 2013.

US gold futures were up 0.2% at $1,555.

“There is some kind of consolidation at these price levels (around $1,550) and the market is assessing the next development in the US-China trade saga,” SP Angel analyst Sergey Raevskiy said.

While there are expectations for monetary policy easing in the eurozone, inversion in US treasury yield curve increased hopes for further rates cuts by the US central bank, he added.

Gold rose more than 1% on Tuesday as an inversion in the yield curve and disappointing US economic data rekindled fears of a recession amid uncertainties around the trade dispute.

“People are beginning to think that the economy is not doing that well, there could be a possible recession, or more likely, a slowing economy, which means the US Federal Reserve will have to cut rates, and that supports gold,” said John Sharma, an economist with National Australia Bank.

Federal funds futures implied traders saw a 91% chance of a 25 basis-point rate cut by the US central bank in September.

Meanwhile on Monday, US President Donald Trump predicted a trade deal with China but optimism wilted after China's foreign ministry spokesperson dismissed claims of phone calls between the two sides.

However, “if there are some sort of tangible signs that the talks are going to restart, or at least that they are getting there, it would be a risk-on outcome and we can see yields go higher and push gold a bit lower,” said Ilya Spivak, senior currency strategist with DailyFx.

On the technical front, bullion's 14-day relative strength index (RSI) was at about 70, indicating that the commodity was approaching overbought territory.

“Gold has become a crowded trade, raising the possibility of a short-term correction,” ANZ analysts said in a note.

Elsewhere, spot silver jumped 1.5% to $18.44/oz, having touched $18.50, its highest level since April 2017.

“There is not much at present to suggest that the demand for gold and silver might abate,” Commerzbank analysts wrote in a note.

Spot platinum climbed 0.7% to $871.60/oz, after touching its highest in nearly a month, while palladium slipped 0.8% to $1,469.51.

Reuters