Picture: REUTERS
Picture: REUTERS

Bengaluru — Gold edged lower on Monday on increasing risk appetite among investors, driven by optimism on US-China trade talks and fading fears of a global economic slowdown.

Spot gold fell 0.1% to $1,511.44/oz at 12.20pm GMT. US gold futures edged 0.2% higher at $1,513.70.

“Gold has been caught in a range for a few weeks considering that these recession fears have really faded. Also, there was some progress in the trade talks, this is really holding gold back at the moment,” Julius Baer analyst Carsten Menke said.

“It’s really this kind of shift of sentiment in financial markets — from concern to rather optimistic — which is causing some headwinds to gold.”

European shares soared to a near two-year high on strong earning reports and hopes for a trade deal between Washington and Beijing.

However, weak manufacturing data from major European regions indicated further uncertainty in global growth, which is supportive of demand for bullion as a safe-haven asset, said analysts.

In Berlin, the European Central Bank’s (ECB's) new head, Christine Lagarde, gives her first speech in the role later in the day and markets expect her to stick to an easy policy script left by her predecessor, Mario Draghi.

On the trade front, the US and China on Friday said they made progress in talks aimed at defusing a nearly 16-month-long trade war that has harmed the global economy, and US officials said a deal could be signed  in November.

Markets drew further optimism from US economic data last week that eased apprehensions of a slowdown fuelled by the trade war.

Last week, the US Federal Reserve cut interest rates for the third time this year, but signalled there would be no further reductions unless the economy takes a turn for the worse.

“The overall backdrop for gold with the shaky global growth, uncertainties related to trade tensions, weakening US dollar that remains in place as we’re moving into 2020 — based on that we believe that gold will be higher,” Menke said.

Speculators increased their net long positions in both gold and silver in the week to October 29, data showed.

Among other metals, silver rose 0.2% to $18.13/oz.

Platinum rose 0.3% to $948.77 per ounce, having earlier hit its highest since September 25 at $955.75, while palladium advanced 0.2% to $1,808.21.

“Given [platinum's] sluggish behaviour this year, particularly when comparing to palladium, perhaps there is room for more extension here. $960 has spooked investors a number of times so that is an important level to watch, in conjunction with the psychological $, 1000,” MKS PAMP said in a note.