Gold Futures Rebound as Economic Worries Reignite Haven Demand
Expectations mounted that the Federal Reserve will soon start lowering U.S. rates.
(Bloomberg) -- Gold futures rebounded from their biggest decline in more than a year on signs of fresh strains on the global economy that may prompt stimulus from central banks.
Australia lowered its cash rate in the country’s first back-to-back interest-rate cuts in seven years on Tuesday, leaving the door open for additional easing as policy makers attempt to support a slowing economy. The U.S. added more products from the EU to a list of goods it could hit with retaliatory tariffs, and economist Nouriel Roubini warned that the trade war and a spike in oil prices could push the world into recession next year.
Bullion jumped to a six-year high last week as rising geopolitical tensions boosted demand for havens and expectations mounted that the Federal Reserve will soon start lowering U.S. rates. President Donald Trump said a new round of talks with China is underway following his meeting with President Xi Jinping, but the damage from the prolonged trade dispute between the two countries may have already spread as reflected by weak manufacturing reports.
“After having some time to reflect upon the weekend summit meeting on trade between U.S. President Trump and China President Xi, the marketplace is not quite so upbeat on the prospects of a final agreement any time soon,” Jim Wyckoff, senior analyst at Kitco Metals, said in a note Tuesday.
Gold futures for August delivery climbed 0.5% to $1,396.30 at 10:42 a.m. on the Comex in New York. Prices fell 1.7% on Monday, the biggest decline for a most-active contract since June 2018, as U.S. equities surged to a record with the resumption of trade talks. A gauge of the dollar slipped on Tuesday.
Rising gold prices and the prospect of lower rates have encouraged investors to expand their holdings in the metal, with assets in exchange-traded funds backed by bullion expanding for a 14th straight session, according to data gathered by Bloomberg. They’ll be watching the U.S. employment data due Friday for clues on the Fed’s next move.
“We do not believe that the correction in recent days means that gold has ended its upswing -- we see it as nothing more than a brief break,” Commerzbank AG analyst Daniel Briesemann said in a note.
In other precious metals, silver and platinum declined, while palladium advanced.
--With assistance from Elena Mazneva.
To contact the reporters on this story: Justina Vasquez in New York at jvasquez57@bloomberg.net;Ranjeetha Pakiam in Singapore at rpakiam@bloomberg.net
To contact the editors responsible for this story: Phoebe Sedgman at psedgman2@bloomberg.net, Joe Richter, Joe Ryan
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