Gold prices rose to session highs above $1175 an ounce in Europe on Friday after US growth data disappointed investors, knocking stock markets lower and lifting bullion’s appeal as a haven from risk.
But the metal is still down nearly 6% so far in July, on track for its biggest monthly loss since December, having slipped as concern over euro zone sovereign debt levels, which sent the metal to a record $1264,90 an ounce in June, receded.
Spot gold hit a high of $1175,75 an ounce and was bid at
$1171,30 an ounce at 1310 GMT, against $1168,05 late in New York on Thursday. US gold futures for December delivery firmed
$2,70 to $1173,90.
Data released by the US Commerce Department showed that economic growth slowed in the second quarter to 2,4%, after revised 3,7% growth rate in the first three months of the year.
While the data is not weak enough to provoke deep concerns over the health of the US economy, it does point to another potentially supportive situation for gold, analysts said.
“The problems in the US had moved completely to the background, and they are starting to emerge now more and more,” said Bank of America-Merrill Lynch analyst Michael Widmer.
“If you are getting into an environment where the Fed thinks more about how it can support the economy through monetary policy, for instance, you could see gold prices moving up.”
The data prompted further losses in European stocks, which fell more than 1% as appetite for assets seen as higher risk waned. US stock index futures also added to losses, pointing to a lower opening on Wall Street.
On the currency markets, the dollar fell to session lows versus the yen and pared gains versus the euro in the wake of the data. The dollar index, which measures the unit’s performance against six other currencies, was flat.
Usually, weakness in the US unit lifts gold’s appeal as an alternative asset and makes dollar-priced commodities cheaper for holders of other currencies.
Confidence in the strength of US growth was already fragile, after St. Louis Fed president James Bullard said on Thursday he is worried about the risks the US might fall into a Japan-style quagmire of falling prices and investment.
His comments helped lift gold in New York trade on Thursday.
COMMODITIES SOFTEN
Among other commodities, oil tumbled nearly 2% after the data as investors focussed on a slowing economy and rising inventories in top consumer the United States. Copper prices slightly extended losses.
From a technical perspective, gold is still looking vulnerable to further losses after breaking through key support at $1175 an ounce earlier this week, analysts said.
“On a closing basis, support for gold still holds at $1160, as the metal’s attempts past this point continue to bring buyers into the market,” said ScotiaMocatta in a note.
“This is encouraging as far as arresting the liquidation goes, but without a break of downtrend resistance, currently holding at $1190, we see no reason to turn bullish on gold.”
Among other precious metals, silver was bid at $17,86 an ounce against $17,59, while platinum was at $1554,20 an ounce against $1560.
Palladium, which rose more than 4% on Thursday on options-related buying, hit its highest since June 22 at $489,50 on Friday, and was later at $483,90 versus $485,28.
The metal, which is up 10% so far in July, is set for its first monthly gain since April. The gold-palladium ratio — the number of ounces of palladium needed to buy an ounce of gold
— fell to 2,4 on Friday, its lowest since mid-May.
“We can understand why palladium and the commodity complex have outperformed gold of late,” said UBS analyst Edel Tully in a note. “Quite simply, investors are seeking risk and for now gold’s safe haven properties have been made redundant.”