Gold benefits as trade turns risk-off

Bengaluru — Gold prices edged up on Thursday as weak data from Germany and a dip in equities raised flags about the pace of global economic growth, while a firm dollar curbed further gains for the metal.

German business morale deteriorated in April, bucking expectations for a small improvement, as trade tensions hurt the industrial engine of Europe’s largest economy, leaving domestic demand to support slowing growth.

Spot gold was up 0.1% at $1,276.19/oz, as of 3.35am GMT. US gold futures slipped 0.1% to $1,278/oz.

Gold is often used as a hedge against economic and financial uncertainties.

The bullion gained for a second straight session, after having dipped to its lowest level since end-December earlier this week.

“Global growth data outside the US have been actually quite poor, we haven’t had anything to sink our teeth in,” said Stephen Innes, head of trading and market strategy, SPI Asset Management.

“We have also anticipated some correction on the equity markets and that just turns the focus back to the major economic drivers,” Innes added.

Asian shares also slipped after the data from Germany deflated risk appetite, stoking concerns that the global economy may still not be out of the woods despite recent positive data from China and the US.

Market participants will now shift focus towards the release of the US GDP data, which is due on Friday.

Investors also eyed further trade negotiations between the US and China. The two countries are slated to begin the next round of talks on trade on April 30, in an attempt to conclude a nearly year-long tariff spat.

However, the US dollar, which traded close to a near two-year peak, capped further gains for the safe-haven bullion.

A stronger dollar makes gold expensive for holders of other currencies.

The metal is still below its 50-day and 100-day moving averages.

“Heavy technical selling activities have imposed negative pressures on the precious metal for the near term,” Benjamin Lu, an analyst at Phillip Futures, said in a note.

Attesting the bearish momentum, holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, dipped 0.2% to 747.87 tonnes on Wednesday, its lowest since October 19.

Elsewhere, silver traded steady at $14.92/oz, while platinum climbed 0.4% to $882.06.

Palladium dipped 0.4% percent to $1,410.77.

Reuters