April 06, 2016
Gold Keeps Gains on Safe-Haven Demand as Stocks Tumble
(Reuters) - Gold held sharp overnight gains on Wednesday as disappointing global economic data and a tumble in equities sent investors scurrying towards the safe-haven metal.
Investors were awaiting the release of the minutes of the Federal Reserve's March policy meeting, due later in the session, to gauge the outlook of the U.S. central bank's monetary policy.
Gold is sensitive to rising U.S. interest rates because they lift the opportunity cost of holding non-yielding assets. It had rallied 16 percent in the first quarter of the year on speculation the Fed will not be able to raise rates.
Spot gold was little changed at $1,229.60 an ounce by 0324 GMT on profit-taking, but retained most of its 1.3-percent gain from Tuesday.
"The Fed will not do anything drastic. They are limited by the global economic concerns and volatile equities," said Mark To, head of research at Hong Kong's Wing Fung Financial Group.
Gold prices at $1,230 are very reasonable and this level will be sustained through the quarter, he said.
Gold had posted its biggest quarterly rise in nearly 30 years in the March quarter as expectations faded that the Fed would move to normalize interest rates. The U.S. central bank raised rates in December for the first time in nearly a decade.
But recent hawkish comments have capped gains. Boston Federal Reserve President Eric Rosengren and Chicago Fed President Charles Evans said this week that the market view about rate hike was "pessimistic".
Assets in SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell 0.28 tonnes to 815.44 tonnes on Tuesday.
For now, bullion has found support along with other safe-haven assets such as the Japanese yen as economic data out of Europe and the United States prompted a retreat from riskier assets.
Data on Tuesday showed the U.S. trade deficit widened more than expected in February, while German industrial orders unexpectedly dropped in February. Britain's economy appeared to have slowed since the start of this year, according to a closely watched survey.
The MSCI All-World Index dropped 1.4 percent on Tuesday, its worst day since early February. The dollar fell to its weakest level against the yen since October 2014.