Gold holds near six-year high as investors fret about recession
Holdings of SPDR Gold Trust rise 1.34% as silver hits highest since September 2016
Gold held steady on Wednesday after rising 1% in the previous session, with prices hovering near a more than six-year high on heightened fears of a global recession after weak US data, the prolonged China-US trade spat and Brexit uncertainties.
Spot gold slipped 0.2% to $1,543.02/oz at 4.07am GMT, but near last week’s $1,554.56/oz, its highest since April 2013.
US gold futures were also down 0.2% at $1,552.4/oz.
Spot silver was up 0.7% to $19.37/oz, after hitting $19.57/oz earlier, its highest since September 2016.
With no agreement on the US-China trade front, investors remain nervous, said Michael McCarthy, chief market strategist at CMC Markets, adding that uncertainties following a parliamentary vote in the UK are a positive for gold.
British legislators defeated Boris Johnson in parliament on Tuesday in a bid to prevent him taking the country out of the EU without a divorce agreement, prompting the prime minister to announce that he would immediately push for a snap election.
Adding to gold’s safe-haven appeal was US manufacturing data that showed activity contracted for the first time in three years in August and President Donald Trump’s threat that he would be “tougher” on Beijing in a second term if trade talks dragged on.
“Rising US rate cut expectations over lacklustre economic data will boost bullion appeal as traders ease up on US dollar strength,” Phillip Futures analyst Benjamin Lu said in a note.
Traders have almost fully priced in a 25 basis point interest rate cut at the Federal Reserve's meeting later this month, according to CME’s FedWatch tool.
Lower interest rates reduce the opportunity cost of holding non-yielding bullion and weigh on the dollar.
The dollar index was down 0.1% against a basket of currencies, while Asian stocks bounced led by Chinese markets after a report showed growth in the country’s service sector accelerating despite broader economic headwinds.
Spot gold faces a resistance at $1,546/oz ounce, a break above which could lead to a gain into the range of $1,568/oz-$1,595/oz, according to Reuters technical analyst Wang Tao.
Holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, rose 1.34% to 890.04 tons on Tuesday.
Elsewhere, spot platinum dipped 0.2% to $956.04/oz and palladium was down 0.3% at $1,537.50/oz.