Gold rises on poor risk appetite around US-China trade deal

Bengaluru — Gold prices rose on Tuesday, after its biggest one-day percentage fall in two-and-a-half years the previous session, as risk appetite soured on worries over global growth and uncertainties around a China-US trade deal.

Spot gold was up 0.6% at $1,391.80 an ounce at 12.05pm GMT, after falling 1.8% on Monday, its biggest one-day percentage decline since November 2016. US gold futures were up 0.5% at $1,395.70 an ounce.

US President Donald Trump said on Monday that any trade deal with China would need to be “somewhat tilted” in favour of the US. The US government also threatened tariffs on $4bn of additional EU goods in a long-running dispute over aircraft subsidies.

“The trade fiasco could be a positive factor for gold as the deal is still not reached yet … The stock markets are in red, which is another positive thing for gold,” said Carlo Alberto De Casa, chief analyst with ActivTrades.

Data showed manufacturing activity slowed last month, weakening appetite for risk. Factory activity shrank across much of Europe and Asia in June, while growth in manufacturing cooled in the US, keeping the world’s monetary policy makers under pressure to avert a recession.

“Investors are still confident that the US Federal Reserve will cut rates in the next few months. As far as that holds we can see gold rise above $1,400,” said De Casa

Gold prices hit a six-year high last week at $1,438.63 an ounce, driven by a dovish outlook from major central banks and an escalation of tensions between the US and Iran.

The market will now focus on US non-farm payrolls data due on Friday, which should help investors better assess whether the Fed will cut interest rates later this month.

“Upcoming US economic numbers and Federal Reserve speakers’ comments are critical as we approach the Federal open market committee meeting at the end of July,” UBS analysts said in a note. “The potential for renewed trade tensions and broader geopolitical risks, in our view, is likely to spur further inflows into gold by financial investors.”

Holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, rose 0.78% to 800.20 tonnes on Monday.

Spot gold may bounce to $1,401, as it has found a support in a narrow range of $1,386-$1,387 an ounce, according to Reuters technical analyst Wang Tao.

Elsewhere, silver was steady at $15.13 an ounce, while palladium rose 0.2% to $1,551.67 an ounce. Platinum gained 0.4% to $833.45, after touching a near seven-week high on Monday.

Reuters