Gold edges down as dollar firms and risk appetite improves

Bengaluru — Gold edged lower on Wednesday, holding near a five-week low as a firm dollar and improved appetite for riskier assets dented the appeal of bullion, while investors awaited further clarity on the US-China trade dispute.

Spot gold was down 0.1% to $1,285.41 an ounce at 11.29am GMT, close to its lowest since January 25 at $1,280.70 hit in the previous session. US gold futures were up about 0.2% at $1,286.80.

“The recovery of the dollar is a negative element and the general risk-on sentiment is not particularly good for gold,” said ActivTrades chief analyst Carlo Alberto De Casa. “The main [equity] market driver has been the optimism surrounding trade talks between the US and China.”

The dollar hovered near a two-week high hit in the previous session, making gold more expensive for holders of other currencies.

Global equities have staged a remarkable comeback in the first two months of the year, rising about 16%, indicating a marked improvement in demand for riskier assets.

A signifier of investor sentiment, holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund (ETF)  languished near their lowest since mid-December last year. Holdings have fallen about 2.7% this year.

However, the overall positive momentum for bullion is intact, analysts said, with the metal supported by concerns about a slowdown in the global economy, aggravated by poor growth figures from Australia and a contracted growth target in China.

Furthermore, the Organisation for Economic Co-Operation and  Development (OECD) cut forecasts again for the global economy in 2019 and 2020, citing trade rows and Brexit uncertainty.

“A drop in gold prices will be reversed by the end of 2019 as fresh concerns about slower global growth coupled with the fall that we expect in US equities once again push risk appetite in gold’s favour,” Capital Economics analyst Ross Strachan said in a note.

Investors will now closely monitor the European Central Bank’s (ECB) monetary policy meeting on Thursday and US non-farm payrolls data on Friday. Gold is considered a safe store of value during times of economic or political uncertainties. On the technical front, for gold to stage a rebound to the key psychological $1,300 mark, “it is important that gold holds the support at $1,280. Buyers could show their strength at this level”, De Casa said.

Among other precious metals, palladium fell 0.1% to $1,514.12 an ounce. Spot silver fell 0.2% to $15.09, after slipping to its lowest since December 27 in the previous session, while platinum fell 1.1% to $827.47.

The global platinum market will see its largest surplus since at least 2013 this year, the World Platinum Investment Council said, forecasting an oversupply of 680,000 ounces in 2019 after a surplus of 645,000 ounces last year.

Reuters