August 3, 2016
Gold Steady as Equities Drop, Fed Rate Hike Prospects Wane
(Reuters) - Gold held on to the previous session's gains on Wednesday as Asian stocks stumbled and weak U.S. economic data undermined expectations of a near-term interest rate hike.
The metal has had a stellar year so far, surging about 28 percent, as investors sought the safe-haven asset amid mounting economic worries, predominantly in the Western world.
Spot gold was nearly unchanged at $1,362.80 an ounce by 0344 GMT, after hitting a high of $1,367.33, its loftiest since July 11, in the previous session.
U.S. gold dropped 0.19 percent to $1,369.90 an ounce.
"We saw the equity markets weaken overnight and that has certainly helped the risk-off mode," said ANZ analyst Daniel Hynes.
Asian shares bowed lower on Wednesday with MSCI's broadest index of Asia-Pacific shares outside Japan falling about 1 percent.
The yen lorded over a weakened U.S dollar as fears that the Bank of Japan may retreat from its massive bond-buying campaign added to a shakeout in debt markets globally.
"We see that the strong yen has helped push Japanese investors back into the gold markets," Hynes added.
A report from the U.S. Commerce Department on Tuesday showed inflation was still muted in the country, which together with the anaemic economic growth pace in the second quarter, could encourage a cautious Federal Reserve to keep interest rates at current levels for a while.
The metal is highly sensitive to U.S. interest rates, increases in which lift the opportunity cost of holding non-yielding gold while boosting the dollar, in which it is priced.
"We see further upside in gold and would not be surprised to see values get to and even break $1,400, especially if there is continued dollar weakness and more wobbles in the U.S. equities," INTL FCStone analyst Edward Meir said in a note.
Spot gold may retrace moderately to a support at $1,358 per ounce before retesting a resistance at $1,368, as suggested by its wave pattern and a Fibonacci projection analysis, Reuters technical analyst Wang Tao said.
Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rose 0.62 percent to 969.97 tonnes on Tuesday.
Among other precious metals, spot silver rose 0.12 percent to $20.63 per ounce, a day after touching a four-week high of $20.78, while spot platinum fell 0.37 percent to $1,159.2 per ounce, after touching $1,177.40, its highest since April 2015, in the previous session.
Spot palladium fell 0.76 percent to $708.8 per ounce, after rising to $722.90 on Tuesday, the highest since June 2015.