Gold Prices Climb But Outlook Remains Negative

While the world deals with worries over declining growth and geopolitical situations, Ebola and downward revision in profits by major US retailers, investors are flocking back to the safety of gold. Gold and silver saw a rollercoaster ride of a session as their US Dollar counterpart swung wildly in intraday trade. Again, the global growth concerns story seems to be offering the reserve currency some cues. Rather than risk-aversion offering some support via safe-haven demand, dampened Fed rate hike bets appear to be in the driving seat for the USD. Gold dipped in the Asian session on Thursday as traders booked profits from the steady climb on Wednesday. Gold is trading at 1241.20 while silver gained 19 points to trade at 17.483 holding close to its support level at 17.50. Gold climbed as high at 1277.36 coming close to its highest point reached on September 11 when the metal touched 1249.75. Bullion rebounded from this year’s low on Oct. 6 and is headed for the first back-to-back weekly rise since July on speculation that the Federal Reserve may delay interest-rate increases. Investors were also cautious as a second nurse in Texas tested positive for the Ebola virus, a week after the first Ebola patient diagnosed in the United States died. Gold retained sharp overnight gains on Thursday to trade near its highest in over a month, with investors seeking safety amid increasing concerns over a slump in the global economy.

Asia extended a selloff in global equities on Thursday. The dollar index was hovering close to a three-week low, while oil extended losses. Flight from risk resulted in a massive rally in U.S. Treasuries, pushing the benchmark 10-year note’s yield as far as 1.865 percent on Wednesday, its lowest level since May 2013. The S&P 500 briefly turned negative for the year on Wednesday, while European equities shed 3.2 percent to mark their biggest one-day slide in almost four years. Investors were spooked after U.S. retail sales declined in September as consumers pulled back on spending for a range of items, while producer prices dropped for the first time in over a year.

Despite the recent gains and a brighter technical picture, concerns still lingered over how much further gold could climb after the metal was unable to maintain all of its gains in the previous session. SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund and a good proxy for investor sentiment, said its holdings fell 0.27 percent to 759.14 tonnes on Wednesday.

Global growth worries continue to weigh on industrial metals which are trading near recent lows. The drop of the US dollar helped give base metals a leg up. Copper gained 7 points but remains near its 2014 bottom at 3.015. Copper prices posted their steepest drop in seven months on fears that slowing global growth will reduce demand for the industrial metal. New signs of decelerating economies in China and the US sent copper prices to a one-week low. Prices fell after US retail sales and New York-area manufacturing activity was weaker than expected. A day earlier, data showed that eurozone industrial production fell 1.8 per cent in August.