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Gold firms as recession fears bolster safe-haven bids

Credit: REUTERS/PETR JOSEK

Gold extended gains on Thursday after climbing 1% in the previous session, as concerns that an inversion in the U.S. government bond yield curve was signalling recession fuelled interest in the metal as a haven from risk.

By Eileen Soreng

Aug 15 (Reuters) - Gold extended gains on Thursday after climbing 1% in the previous session, as concerns that an inversion in the U.S. government bond yield curve was signalling recession fuelled interest in the metal as a haven from risk.

At the day's peak of $1,523.91, gold was back to within $11 of Tuesday's six-year high, hit on fears of a global downturn as investors fretted over a U.S.-China trade war, unrest in Hong Kong and a slide in emerging-market assets.

Spot gold XAU= was up 0.2% at $1,519.71 per ounce by 0946 GMT, while U.S. gold futures GCcv1 were up 0.2% at $1,530.60.

The slide in government bond yields has been an alarming signal in terms of recession fears, said Norbert Ruecker, head of economics and next-generation research at Julius Baer.

"The overall uncertainty from the trade dispute is high and we also expect some central bank action for recession-fighting to come over the next weeks and months," Ruecker said. "This should support the gold price at current levels."

The U.S. yield curve was inverted for a second straight trading session on Thursday. The yield curve inversion, which has historically signalled a looming recession, triggered an extensive flight to safety. US/

World shares held at 2-1/2-month lows, though Wall Street was set for a firmer open as investors bet the U.S. Federal Reserve and other central banks would respond strongly to recession warnings emanating from bond markets. MKTS/GLOB

On the trade front, senior U.S. officials on Wednesday said China has made no concessions after Washington delayed tariffs on some Chinese imports, the latest sign that the trade saga is going nowhere.

Spot gold has gained over 8%, or more than $100, since the beginning of the month amid the heightened trade tensions and a slew of disappointing economic data globally.

"We think gold could rise to as much as $1,580-$1,600 over the remainder of the year – we think risks are skewed to the upside and would not rule out a temporary breach of the upper end of that range," analysts at UBS said in a note.

Markets are awaiting U.S. retail sales data due later in the day, which could further hint at the strength of the world's largest economy.

Indicative of investor interest, holdings of the world's largest gold-backed exchange-traded fund, SPDR Gold Trust GLD, rose 0.9% to 844.29 tonnes on Wednesday. GOL/ETF

Elsewhere, silver XAG= rose 0.3% to $17.26 per ounce.

Platinum XPT= dipped 0.1% to $839.33 an ounce and palladium XPD= was 0.1% higher at $1,425.77.

(Reporting by Eileen Soreng in Bengaluru; Editing by Jan Harvey)

((eileen.soreng@thomsonreuters.com; Within U.S. +1 646 223 8780, Outside U.S. +91 80 6749 6131; Reuters Messaging: eileen.soreng.thomsonreuters.com@reuters.net))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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