Gold ticks up on recession worries, trade uncertainty

Gold eked out gains on Thursday against the backdrop of recession fears, with traders tracking signs of progress on the U.S.-China trade talks and global central banks for direction on interest rates.

Spot gold rose 0.2 percent to $1,542.06 per ounce, as of 0331 GMT.

On Wednesday, the bullion ended lower but remained around its over six-year peak of $1,554.56 hit on Monday.

U.S. gold futures were up 0.1 percent at $1,550.80 an ounce.

Bull markets (for gold) are on hold as we wait for further news on the trade dispute, which seems to be the major driver, said Michael McCarthy, chief market strategist at CMC Markets.

“Global growth in the balance here and a resolution (in the trade conflict) would be good for growth and bad for gold,” McCarthy added.

On the trade front, the Trump administration on Wednesday made official its extra 5 percent tariff on $300 billion in Chinese imports, and set collection dates of September 1 and December 15.

While Trump in recent days has toned down his aggressive China trade rhetoric, it has not translated to a retreat from the planned tariff hikes. It remains unclear whether U.S. and Chinese negotiators will resume in-person talks in September as previously suggested by U.S. officials.

Adding to the uncertainty was British Prime Minister Boris Johnson’s decision to suspend parliament for more than a month before Brexit.

Underscoring the gloomy global sentiment, yields on 30-year U.S. Treasuries and 10-year German bunds hit record lows on Wednesday.

The U.S. Treasury yield curve remains inverted, which is commonly considered a sign of an impending recession.

The U.S. Federal Reserve and the European Central bank are expected to cut rates next month, while many investors believe the Bank of Japan could also join the fray if market sentiment weakens further.

Gold tends to appreciate on expectations of lower interest rates, which reduce the opportunity cost of holding non-yielding bullion.

Markets are fully priced in for a quarter-point cut in interest rates by the U.S. Fed next month, and over 100 basis points of easing by the end of next year.

Indicative of market sentiment, holdings of the SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, have increased by 6.6 percent this month.

The dollar index which measures the greenback against a basket of six major currencies, was little changed after rising 0.2 percent in the previous session.

Elsewhere, spot silver rose 0.3 percent to $18.38 per ounce, while platinum inched up 0.1 percent to $900.66.

Palladium was up 0.3 percent to $1,473.56 per ounce.

Source: Reuters

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