Futures & Commodities

Gold rises 1% as risk sentiment sours on trade, Brexit uncertainty

Gold bars sit in a vault at the Perth Mint Refinery, operated by Gold Corp, in Perth, Australia, on August 9, 2018.
Carla Gottgens | Bloomberg | Getty Images

Gold rose 1% on Tuesday, bouncing off a one-week low touched earlier in the session, as uncertainties over U.S.-China trade talks and Brexit drove a decline in stock markets and prompted investors to seek refuge in the safe-haven metal.

Spot gold rose 0.7% to $1,503.43 per ounce after rising as much as 1% to $1,508.31 earlier in the session. U.S. gold futures were up 0.3% to $1,509 per ounce.

Wall Street tumbled, adding to declines in global stocks, as sentiment soured ahead of high-level trade talks after a report that Washington was moving ahead with efforts to limit capital flows into China and the inclusion of more Chinese firms in a blacklist.

"There's a possibility the U.S.-China trade talks will stall based on this, that's the reason why there's a small flight into safe-haven products," said Phillip Streible, senior commodities strategist at RJO Futures.

"(However) gold is range-bound right now. There's $1,465 to the downside and $1,566 on the upside, we're just stuck in this range."

On the European front, the prospects of an orderly Brexit seemed dim as a British source said that German Chancellor Angela Merkel told Prime Minister Boris Johnson by phone that a deal was "overwhelmingly unlikely".

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.

"It's (gold) got a little bit of downside exposure because there are a lot of people reassessing what happened as they had been too bearish on the economic outlook and current conditions, and they're backing away from that," said Jeffrey Christian, managing partner of CPM Group.

While gold could see a little bit of a downside in the near-term, it is probably going to head higher because of the global geopolitical uncertainties, Christian added.

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.

Among other precious metals, silver gained 1.4% to $17.68 an ounce, after touching a high of $17.80 since Sept. 27.

Platinum rose 0.8% to $883.43, while palladium fell 0.6% to $1,650.05.

"Silver is getting some benefit from the safe-haven buying and is tracking gold higher," RJO Futures' Streible said.