Gold basks as recession fears send investors in search of safety

Bengaluru — Gold prices rose on Thursday, as investors flocked to safer havens after an inverted US bond yield curve pointed to new recession fears following poor economic data from Germany and China.

Spot gold was up 0.2% at $1,519.18 at 3.13am GMT. On Tuesday, gold prices scaled their highest level since April 2013 at $1,534.31.

US gold futures gained 0.2% to $1,530.50/oz.

“We are seeing flight to safety, market confidence is a bit shaky. We have been seeing that the economy is showing signs of weakness and it’s starting to slow in the second half of this year,” said Benjamin Lu, an analyst at Phillip Futures.

“A successful breakout at $1,525 per ounce will see gold bulls make an attempt on previous highs of $1,535.”

Yields on 10-year US Treasury notes fell below the two-year yield, intraday, for the first time since 2007. The inversion, which has historically signalled a looming recession, triggered an extensive flight to safety.

Fears of a global recession gripped financial markets around the world as stocks slumped to more than two-month lows on Thursday, tracking a Wall Street slide.

“We have continued safe-haven buying with stock markets looking pretty wobbly ahead of US retail sales data, which is really important,” Oanda analyst Jeffrey Halley said.

“The US is the last man standing amongst Europe and China. We could see an outsized reaction overnight if data comes in ugly, which should help gold again.”

Economic data from China and Germany suggested a faltering global economy, hit by the worsening US-China trade war, Brexit and geopolitical tensions.

Gold, which pays no interest of its own, is often used as a hedge against political and financial risks.

Markets are anticipating US retail sales data due later in the day, which could serve as an indicator of the strength of the world’s largest economy.

On the trade front, senior US officials said on Wednesday that China has made no trade concessions after the US delayed tariffs on some Chinese imports, the latest sign that the trade saga is going nowhere.

Investors are focused on the Federal Reserve’s annual symposium next week. Traders see a 63.7% chance of a 25-basis-point rate cut by the Fed in September.

Lower US interest rates put pressure on the dollar and bond yields, increasing the appeal of non-yielding bullion.

Holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, rose 0.9% to 844.29 tons on Wednesday.

Among other precious metals, silver rose 0.6% to $17.30/oz.

Platinum gained 0.54% to $845/oz and palladium climbed 0.7% to $1,434.41/oz. 

Reuters