Gold price barely rises since equity sell-off seen as blip

New York (Feb 6)  Gold prices edged higher on Tuesday but did not see a larger safe-haven boost from tumbling equity markets because the global economy is largely robust and shares were thought likely to rebound.

World stock markets nosedived for a fourth day running on Tuesday, with $4 trillion wiped off since indexes hit record highs eight days ago.           

Gold is seen as a safe-haven investment due to its ability to retain value even at times of financial or political uncertainty. It is also used as a hedge against inflation. But spot gold was up only 0.3 percent at $1,343 per ounce at 1045 GMT, barely extending Monday's 0.5 percent gain.

U.S. gold futures for April delivery rose 0.7 percent to $1,345.90 per ounce on Tuesday. "Given the overall positive economic environment, we don'think this will be the end of this bull market in equities and that is why we are not too positive on gold right now," said Carsten Menke, commodities analyst at Julius Baer in Zurich.

The selling in equities largely stemmed from technical factors after players targeting volatility in portfolios were caught out on Friday when stronger-than-expected U.S. payrolls data was released and volatility spiked, he added. 
    The dollar is expected to rebound in the first half of the
year and pressure gold, which could sink as low at $1,225, after
which bullion should stabilise and rebound, Menke said.
    David Govett, head of precious metals at broker Marex
Spectron, agreed that share markets would probably bounce back.
    "I think this is a healthy, albeit rather vicious correction
and we may see more over the next week, but on the whole I
really wouldn’t panic," he said in a note.
    "As such, I don’t think gold will go a lot higher."
    Last week, the U.S. Federal Reserve kept interest rates
unchanged but said inflation was likely to rise this year and
hinted at "further gradual" rate increases.            
    Gold is highly sensitive to rising U.S. interest rates, as
these increase the opportunity cost of holding non-yielding
bullion, while boosting the greenback.
    Spot silver rose 0.9 percent to $16.89 per ounce. It
fell 3.7 percent on Friday in its biggest one-day decline since
December 2016.       
    Platinum gained 0.6 percent to $995.50 per ounce,
while palladium was down 1 percent to $1,020.22 per ounce
after touching $1,006.10, its lowest since Dec. 14, 2017.
    "The PGMs (platinum group metals) are certainly going to
benefit from the better economic backdrop we're now seeing in
2018. In fact, I think the rest of the complex will certainly
outperform gold in the medium term," ANZ analyst Daniel Hynes
said.
    Palladium rose to an all-time high of $1,138 on Jan. 15 on
higher automotive demand and supply shortages.