Gold firms as recession fears bolster safe haven bids
Gold extended gains on Thursday after climbing 1% in the previous session, as concerns that an inversion in the U.S. government bond yield curve was signaling recession fuelled interest in the metal as a haven from risk.
At the day’s peak of $1,523.91, gold was back to within $11 of Tuesday’s six-year high, hit on fears of a global downturn as investors fretted over a U.S.-China trade war, unrest in Hong Kong and a slide in emerging-market assets.
Spot gold was up 0.2% at $1,519.71 per ounce by 0946 GMT, while U.S. gold futures were up 0.2% at $1,530.60.
The slide in government bond yields has been an alarming signal in terms of recession fears, said Norbert Ruecker, head of economics and next-generation research at Julius Baer.
“The overall uncertainty from the trade dispute is high and we also expect some central bank action for recession-fighting to come over the next weeks and months,” Ruecker said. “This should support the gold price at current levels.”
World shares held at 2-1/2-month lows, though Wall Street was set for a firmer open as investors bet the U.S. Federal Reserve and other central banks would respond strongly to recession warnings emanating from bond markets.
On the trade front, senior U.S. officials on Wednesday said China has made no concessions after Washington delayed tariffs on some Chinese imports, the latest sign that the trade saga is going nowhere.
Spot gold has gained over 8%, or more than $100, since the beginning of the month amid the heightened trade tensions and a slew of disappointing economic data globally.
“We think gold could rise to as much as $1,580-$1,600 over the remainder of the year – we think risks are skewed to the upside and would not rule out a temporary breach of the upper end of that range,” analysts at UBS said in a note.
Markets are awaiting U.S. retail sales data due later in the day, which could further hint at the strength of the world’s largest economy.
Indicative of investor interest, holdings of the world’s largest gold-backed exchange-traded fund, SPDR Gold Trust, rose 0.9% to 844.29 tonnes on Wednesday.
Elsewhere, silver rose 0.3% to $17.26 per ounce.
Platinum dipped 0.1% to $839.33 an ounce and palladium was 0.1% higher at $1,425.77