Gold price gains as risk sentiment wanes ahead of U.S.-China talks

October 8, 2019

New York (Oct 8) - Gold rose on Tuesday, shaking off losses from earlier in the session, while the dollar eased and European stocks fell ahead of minutes from the U.S. Federal Reserve and trade talks between Washington and Beijing.

Spot gold rose 0.7% to $1,503.34 per ounce as of 1114 GMT. Prices had dropped as much as 1% in the previous session.

U.S. gold futures were up 0.3% at $1,509.10.

"The stock market is increasing losses, so gold is taking back the safe haven role," ActivTrades chief analyst Carlo Alberto De Casa said, adding, "The markets are also fearing the trade talks and what's going on with Brexit."

Global stocks fell after China said it would take measures to protect its sovereign security following Washington's move to blacklist Chinese companies, and as disappointing European earnings doused investors' optimism.

In a setback for prospects of an orderly Brexit, a British source said that German Chancellor Angela Merkel told Prime Minister Boris Johnson by phone that a deal was "overwhelmingly unlikely" unless Britain left its province of Northern Ireland in Europe's customs union.

The European Union then accused Britain of playing "a stupid blame game".

"Gold seems to be relatively stable at the moment and that has a lot to do with the fact we are in a fragile risk environment," said OANDA senior market analyst Craig Erlam.

Chinese Vice Premier Liu He and U.S. Trade Representative Robert Lighthizer are set to resume top-level trade talks on Thursday, ahead of a scheduled increase in U.S. tariffs on $250 billion worth of Chinese goods on Oct. 15.

"If we do see a full collapse (in trade talks) unexpectedly, that will lead to a lot of risk aversion which could be the bullish catalyst gold needs," Erlam said, adding there was a lot of uncertainty over the Fed minutes as well.

Investors are also awaiting the U.S. Federal Open Market Committee's minutes from its September meeting on Wednesday for clues on whether the central bank will cut rates at its October session.

Lower interest rates tend to increase investor interest in non-yielding gold. Gold also drew support from the dollar, with the dollar index shedding overnight gains against rivals.

"Gold ETFs (exchange-traded fund) are close to the highest in years, so there definitely is demand for gold because of trade tensions and the slowdown in general in global growth rates," said SP Angel analyst Sergey Raevskiy.

Holdings of the world's largest gold-backed ETF, SPDR Gold Shares , held close to their highest in nearly three years at about 923.76 tonnes. Among other precious metals, silver gained 0.4% to $17.50 an ounce, while platinum rose 0.7% to $882.86 and palladium fell 0.9% to $1,645.47.


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