Gold prices edge lower after surge on fears of a global trade war

London (Apr 3)  Gold prices edged lower on Tuesday, having surged in the previous session as falling US stock markets and fears of a global trade war pushed investors toward safer assets.

Spot gold was down 0.3% at $1,337.31 an ounce at 10.58am GMT after rising 1.3% on Monday. US gold futures were 0.4% lower at $1,341.60 an ounce.

"It’s a correction after yesterday’s strong move," said Commerzbank analyst Carsten Fritsch. "There’s a lack of conviction that prices will rise much further or can sustain levels of $1,350. Profit-taking started here so we are back below $1,340."

Gold has struggled to break from a trading range of $1,310 to $1,360 since the start of the year. "It’s going to take a significant trigger to push it beyond this range," said Danske Bank analyst Jens Pedersen.

European stock markets continued to fall on Tuesday, led by tech shares, but Wall Street futures suggested that US markets would open higher.

Meanwhile, the Trump administration is, this week, expected to unveil a list of advanced techn Chinese imports targeted for US tariffs after Beijing raised tariffs on 128 US products on Monday, escalating a dispute between the world’s two largest economies. Gold is often used as a safe place to park assets during times of financial or political uncertainty.

Funds have raised their bets on higher prices, with the net long position on the Comex exchange rebounding from a three-month low. Speculative investors have room to expand their long positions further, helping drive prices higher, analysts at Citi said in a note. Higher market volatility and rising tension between Washington and Beijing will likely hold gold above $1,300 throughout 2018, they said. "We assign a 30% probability that gold prices can scale $1,400 an ounce this year."

Momentum indicators suggested gold prices would rise, with technical fibonacci support at $1,317.25 and resistance at $1,361.80, analysts at ScotiaMocatta said in a note.

In other precious metals, spot silver was down 0.4% at $16.55 an ounce after rising 1.8% in the previous session. Platinum was 0.2% higher at $930.90 an ounce. Palladium was up 0.5% at $939.30 after touching $927.75, its lowest since October 10.

Reuters

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