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Gold steady as slowing economy, US-China trade war raise safe-haven demand

Gold is often used as a hedge against political and economic uncertainty

Reuters 

gold prices

prices stood firm on Wednesday, after gaining the most since Jan. 9 the day before, on higher demand for safe-haven assets over concerns of slowing global economy and uncertainties about the US-trade row.

Spot was little changed at $1,284.50 per ounce by 0553 GMT, while US futures were up 0.1 per cent at $1,284 per ounce. Spot gold rose 0.4 per cent on Tuesday as global stock fell. Asian stocks edged down on Wednesday.

Disappointing macro fundamentals data and a sudden surge in uncertainties surrounding the U.S.- trade talks have made investors shun riskier assets, fuelling demand for safety, said Margaret Yang, at

However, a lack of significant movement in Asian equities was limiting gold's gains, Yang added.

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

"As the risk sentiment is biased towards the bearish side, based on all this data, gold will have more room to go up and potentially challenge the resistance of $1,290-$1,295," Yang said.

Disappointing economic data from the and added to the sense of an overall slowdown. US home sales tumbled to their lowest in three years in December, data on Tuesday showed. Meanwhile, export data released on Wednesday fell short of expectations.

Additionally, the Financial Times said that the rejected a Chinese offer for preparatory trade talks this week ahead of high-level negotiations scheduled for next week. denied the report.

Also supporting gold was a prolonged partial US government shutdown and expectations that the Federal Reserve will hold its multi-year rate hike cycle, analysts said.

Higher interest rates tend to reduce the appetite for non-yielding bullion.

Reflecting investors' appetite for gold, holdings of the SPDR Gold exchange-traded fund (ETF), the largest gold-based ETF, was at its highest since June 2018.

"Steady moves in the dollar even after dovish comments from Fed and disappointing macroeconomic data is restricting gold's movement besides its inability to break above the resistance at $1,300," said Hareesh V, at Geojit Financial Services.

Spot gold may break a support at $1,279 per ounce and fall to the next support at $1,268, as suggested by its wave pattern, a projection analysis and a rising trendline, according to

Meanwhile, palladium, which hit a record high of $1,434.50 an ounce last week on low inventories and rising demand, fell for a fourth session, dropping 0.3 per cent to $1,345.50.

Silver rose 0.3 per cent to $15.38 an ounce, while platinum was up 0.5 per cent at $792.

First Published: Wed, January 23 2019. 11:52 IST
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