Gold rebounded yesterday from its biggest decline in more than two years on signs of fresh strains on the global economy.
Prices rose after factory activity across Asia and Europe shrank last month, while the US showed only meagre growth, according to purchasing managers' indexes (PMIs). This signalled a worsening outlook for growth, which may prompt stimulus from central banks.
Still, the resumption of talks between the US and China following their trade truce over the weekend saw American equities surging to a record on Monday, sinking gold. Investors will be watching out for the US employment data due on Friday for clues to the Federal Reserve's monetary policy going forward.
Bullion charged to a six-year high last week on expectations that the Fed would start cutting interest rates as soon as this month, and as rising geopolitical tensions boosted demand for safe havens.
US President Donald Trump said a new round of trade talks with China is under way following his meeting with President Xi Jinping, but the damage from the prolonged dispute between the two countries may have already spread, as reflected by the weak PMIs. News that the US added more products from the European Union to a list of goods it could hit with retaliatory tariffs worsened the uncertainty.
"Gold remains supported by the weaker global growth outlook and the lower-for-longer interest rate narrative, but there is not a lot of excitement today as the market feels battered and bruised after the post Group of 20 beatdown," Mr Stephen Innes, managing partner at Vanguard Markets, said in a note.
Spot gold climbed as much as 0.5 per cent to US$1,391.60 an ounce, and was at US$1,388.53 at 10.30am yesterday in Singapore. Prices fell 1.8 per cent on Monday, the most since November 2016. The US dollar was steady after rising 0.5 per cent on Monday.
Investors have been encouraged by the run-up in prices. Holdings in bullion-backed exchange-traded funds have expanded for a 14th straight day to the highest since 2013.
In other precious metals, spot silver rose 0.1 per cent, platinum gained 0.1 per cent and palladium was little changed.