Growth worries send investors in search of the safety of gold

Bengaluru — Gold prices rose on Monday as investors sought safety as equities slipped after weak Chinese trade data dented risk sentiment and rekindled fears of a global economic slowdown.

Spot gold rose 0.6% to $1,294.59/oz by 11.07am GMT, while US gold futures were up 0.4% at $1,295/oz.

“Some of the exuberance we have seen across risky assets in the last couple of weeks seems to have faded off as we start a new week. With that, we are once again seeing an underlined demand for gold,” said Saxo Bank analyst Ole Hansen.

The metal is often used as a hedge against economic and political uncertainty.

Softening equities and weak trade data from China “highlights that even though the market is hopeful of a [US-China] trade deal, the question remains whether this current momentum towards weaker global economic growth can be arrested.”

Chinese exports fell by their most in two years in December, alongside a significant contraction in imports, data showed on Monday, prompting a deceleration in global stock markets and highlighting fears of a sharper slowdown in global growth.

On the technical front, the $1,300/oz level is “quite a barrier” for gold at the moment, said ABN AMRO analyst Georgette Boele.

Spot gold has gained more than 11% since hitting a one-and-a-half-year low in mid-August at $1,159.96.

Investors will now be keenly eyeing developments on trade between the US and China, with US officials expecting a visit by Beijing’s top trade negotiator later this month, after mid-level discussions between the two countries ended on a seemingly positive note.

“Safe-haven appeal continues to gleam in the current term as investors deliberate on economic uncertainties and heightened geopolitical risks in 2019,” analysts at Phillip Futures said in a note.

Adding to the geopolitical unease, is an impending vote on British Prime Minister Theresa May’s Brexit deal on Tuesday, along with a stretched partial US government shutdown over President Donald Trump’s demand to build a wall along the US-Mexico border.

Gold has also been considerably lifted by a dovish indication from US Federal Reserve chair Jerome Powell, who last week reaffirmed that the central bank had the potential to remain patient on monetary policy, downplaying suggestions interest rates would be raised twice more this year.

Among other precious metals, palladium fell 0.4% to $1,312.49/oz. It hit a record high at $1,342.43 last week.

Platinum dropped 1.1% to $801.60.

Silver slipped 0.2% to $15.57/oz. 

Reuters