Gold price snaps two-day decline as European stocks slide

London (Apr 5)  Gold rebounded by 1 percent on Tuesday, snapping two days of losses as risk appetite evaporated, pushing European stocks down 1.5 percent and knocking the dollar to a 17-month low against the yen.

That helped to reverse a two-day drop in gold that had sent prices back towards their lowest since late February. Uncertainty over the outlook for U.S. monetary policy limited moves, however.


Spot gold was up 1.4 percent at $1,231.90 an ounce by 0930 GMT, while U.S. gold futures for June delivery gained $14.10 to $1,233.30.

German shares led equities losses after data showed the biggest fall in German factory orders for six months, suggesting that Europe's biggest economy is becoming caught up in a global slowdown. Crude oil prices fell and the euro retreated a quarter of a percentage point against the dollar.

"If I look at markets, I would say that there is some safe-haven buying," ABN Amro analyst Georgette Boele said.


"Gold doesn't want to go lower at the moment, so people are looking for a reason to buy it, and that seems to be negative equities."

Gold had posted its biggest quarterly rise in nearly 30 years in the March quarter, rallying 16 percent on fading expectations of moves by the U.S. Federal Reserve to normalise interest rates because of concerns over the global economy.

The metal, which is highly exposed to rising rates because they lift the opportunity cost of holding non-yielding assets, has been pinned in a range by uncertainty over Fed policy.


Fed Chair Janet Yellen said last week that the U.S. central bank would proceed cautiously with rate increases.

But Boston Fed President Eric Rosengren on Monday expressed surprise that futures markets currently imply only one or no interest rate increases this year, saying that such a prediction could prove overly pessimistic.

"While the recent turmoil in financial markets has made the Fed reluctant to hike rates further in the near term, the tight labour market and resilient core inflation are likely to cause the Fed to deliver a 25 basis point hike before year-end," Societe Generale said in a note.

Among other precious metals, silver was up 1.7 percent at $15.12 an ounce, platinum rose 1.8 percent to $955.40 and palladium gained 1.2 percent to $556.

Source: Reuters