Gold inches up on safe-haven demand amid China worries
Last updated on: 09 October,2018 11:24 am
U.S. gold futures rose 0.5 percent to $1,194.40 an ounce.
BENGALURU (Reuters) - Gold prices edged higher on Tuesday drawing some safe-haven bids from risk-averse investors as Asian stocks fell amid worries over a potential slowdown in China’s economic growth and as the dollar eased against the yen.
Spot gold was up 0.3 percent at $1,190.65 an ounce at 0355 GMT. On Monday, it fell 1.2 percent, its biggest one-day percentage fall since Aug. 15, and also touched a more than one-week low of $1,183.19.
U.S. gold futures rose 0.5 percent to $1,194.40 an ounce.
“Gold is getting some support from bargain hunting and also some safe haven support on concerns of a potential sell-off in equities,” said Stephen Innes, APAC trading head at OANDA in Singapore.
“I strongly believe the market is underpricing the potential for equity markets to derail. This is a key hedge for gold in my view.”
Asian shares hit 17-month lows on Tuesday as China allowed its currency to slip past a psychological bulwark amid sharp losses in domestic share markets, a shift that pressured other emerging currencies to depreciate to stay competitive.
The dollar slipped against the yen in Asia on Tuesday on simmering anxiety about higher U.S. bond yields, the Sino-U.S. trade war and political turmoil in Europe.
Meanwhile, the International Monetary Fund on Tuesday cut its global economic growth forecasts for 2018 and 2019, saying that trade policy tensions and imposition of import tariffs were taking a toll on commerce while emerging markets struggle with tighter financial conditions and capital outflows.
Gold has held in a $34 range for the last 1-1/2 months, which some analysts say suggests resilience. Worries over the damage to emerging market economies from higher U.S. interest rates has spurred safe-haven bidding.
“The current political and economic climate will lead to people buying the dollar but after the dollar, gold is the next preference,” said Peter Fung, head of dealing at Wing Fung Precious Metals in Hong Kong.
“Today, there is some short-covering and we also see some fresh buying interest due to lower prices.”
Spot gold may end its weak bounce below a resistance at $1,193 per ounce, and then retest a support at $1,184, as suggested by a projection analysis, according to Reuters technical analyst Wang Tao.
Gold has fallen more than 13 percent from a peak in April largely due to the dollar’s strength, which reflects a vibrant U.S. economy, rising U.S. interest rates and trade tensions.