Gold stalls as trade deal whets risk appetite

Gold prices edged higher on Friday but made little headway on the week as risk appetite improved on the back of encouraging Chinese economic data and the signing of the preliminary US-China trade deal.

“You would expect gold to trade a little bit lower after the economic data from China. [But] what is pushing gold prices higher is the sense of caution as to what to expect after the phase-one trade deal,” said FXTM analyst Lukman Otunuga.

“I think the sense of uncertainty and caution is encouraging investors to take positions in gold.”

The afternoon gold fixing on Friday in London was $1,557.60 an ounce, compared with $1,553.60 a week earlier. In the Thai market, prices were quoted around 22,400 baht per baht-weight (15.2 grammes).

World shares hit record highs after official figures showed China’s economy was stabilising as the trade truce revived business confidence.

Analysts said that with trade fears ebbing, investors are now looking for new price drivers for gold and keeping a closer watch on macroeconomic conditions generally.

A Reuters poll on Wednesday showed that while the outlook for growth and inflation remained lukewarm in the euro zone, the chances of a recession have faded somewhat. Central banks in South Africa, Turkey and Argentina all cut interest rates last week, looking to provide stimulus to flagging economies.

Physical gold purchases gathered steam ahead of the Lunar New Year celebrations in China and Singapore. But demand was fragile in India, the world’s second-largest gold consumer, where dealers were offering a discount of up to $11 an ounce over official domestic prices, compared with a discount of $7 last week.