Gold edged higher on Tuesday, hovering near a 3-month high hit in the previous session, as global slowdown worries driven by trade conflicts amid expectations of a US interest rate cut stoked investors towards the safe-haven bullion. The lower interest rates cut the opportunity cost of holding non-yielding commodities, while gold also tends to benefit from growth concerns as an alternative to cyclical assets like stocks.
Spot gold was 0.1% higher at 1,325.72 USD per ounce as of 06:20 a.m. ET, after touching its highest since February 27 at 1,328.98 USD in the previous session. Meanwhile, the U gold futures were up 0.2% at 1,330.50 USD per ounce.
Weak sentiment around the breakdown in the US-China trade relationship has seen investors seek safe-haven assets. A surge in safe-haven demand has been observed over the past few days because no-one expected the United States to open a new trade war front with Mexico after China.
Also, the weakness in equity markets and clearly the indications of a rate cut in the US has seen gold come to fore, which has driven investors back into the gold market.
Adding to woes, factory activity contracted across Asia and Europe last month on fears of a global economic downturn. Furthermore, US manufacturing growth slowed further in May to its weakest pace in more than two-and-a-half years, a national purchasing managers’ survey showed on Monday.
Lingering global trade uncertainty is weighing upon equity markets and is likely to see participants move into safe-haven assets, This is likely to drive gold higher over the near-term, with initial targets extending toward 1,330 USD and beyond the February high of 1,346.80 USD, while the short-term key for the metal will be the continued ETF and hedge fund interest.
Holdings of the world’s largest gold-backed exchange-traded fund, SPDR Gold Trust, rose by 2.2% on Monday, their biggest one-day percentage gain since July 2016. At these high price levels, there will be some profit-booking, but the tone (for gold) is positive until 1,300 USD on the downside is breached.
Signifying an uptick in investor sentiment towards the metal, speculators increased their net long positions in COMEX gold in the week to May 28, data showed.
Among other precious metals, the silver was down by 0.3% at 14.73 USD per ounce, having touched a more than two-week high of 14.83 USD on Monday.
Platinum edged 0.1% lower to 820.13 USD per ounce after hitting a two-week high of 825.78 USD, while palladium was nearly steady at 1,324.76 USD per ounce.
Gold price analysis
During the trading yesterday, gold increased its value from 1,306.09 USD to 1,324.76 USD per ounce.
If the gold overcomes the resistance range of 1,333.10-1,335.76 USD it will head towards the area of 1,341.45-1,342.77 USD. Upon success, the upward trend will continue to 1,355.09-1,357.75 USD.
If the gold fells below the support zone of 1,313.77-1,311.11 USD, the next support will be the zone 1,298.79-1,297.47 USD. In case of a breakthrough, the downward movement will continue to 1,291.78-1,289.12 USD.
Silver price analysis
During trading yesterday, silver rose from 14.56 USD to 14.75 USD per ounce.
If today the silver overcomes the resistance range of 14.85-14.88 USD it will head towards the zone of 14.96-14.97 USD. Upon success, the upward movement will continue to 15.10-15.13 USD.
If the silver fells below the support zone 14.63-14.60 USD, the next support will be the zone 14.47-14.46 USD. In case of a breakthrough, the downward movement will continue to 14.38-14.35 USD.