Gold prices rose 1.5 per cent overnight, a day after posting the biggest one-day percentage fall in two and a half years, as US Treasury yields fell on worries over global growth and renewed concerns over global trade.
Spot gold jumped 1.55 per cent to $US1,405.53 per ounce after falling 1.8 per cent on Monday – its biggest one-day percentage decline since November 2016.
US gold futures settled 1.3 per cent higher at $US1,408 per ounce.
“The steady rally in bonds and US dollar unable to capitalise on Monday’s sharp gain is encouraging (gold) bulls. Prices holding $US1,380, the short-term support has helped,” said Tai Wong, head of base and precious metals derivatives trading at BMO.
US yields were also pressured by a drop in British yields to two and a half year lows after Bank of England Governor Mark Carney cited risks from Brexit and trade conflicts in a speech that prompted speculation the BOE may lower interest rates in the next 12 months.
White House trade adviser Peter Navarro said on Tuesday US trade talks with China are heading in the right direction and it will take time to get the right deal made.
The US government also threatened tariffs on $US4 billion of additional European Union goods in a long-running dispute over aircraft subsidies.
“The trade fiasco could be a positive factor for gold as the deal is still not reached yet,” said Carlo Alberto De Casa, chief analyst with ActivTrades.
“The stock markets are in the red, which is another positive thing for gold.”
Data showed manufacturing activity slowed last month, weakening appetite for risk.
Gold prices hit a six-year high last week at $US1,438.63 an ounce on dovish outlooks from major central banks and an escalation of US-Iran tensions.
The market is focusing on US non-farm payrolls data due on Friday, which should help investors better assess whether the Fed will cut interest rates later this month.
“Upcoming US economic numbers and Federal Reserve speakers’ comments are critical as we approach the Federal Open Market Committee meeting at the end of July,” UBS analysts said in a note.
“The potential for renewed trade tensions and broader geopolitical risks, in our view, is likely to spur further inflows into gold by financial investors.”
Holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, rose 0.78 per cent to 800.20 tonnes on Monday.
Silver was up 0.47 per cent at $US15.21 per ounce while palladium rose 0.87 per cent to $US1,560.51 per ounce.
Platinum fell 0.2 per cent to $US828.75 an ounce after touching a near seven-week high on Monday.