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Gold Rebounds as Markets Turn Cautious; Platinum Hits 2-Year High

By Geoffrey Smith

Investing.com -- Gold prices rebounded on Wednesday but failed to break out of their recent downward trend, as markets dialled back their hopes for a rebound in the world economy now that China and the U.S. have signed their trade truce.

By 11:30 AM ET (1630 GMT), gold futures for delivery on the Comex exchange were up 0.4% at $1,551.20 a troy ounce. Spot gold was up 0.3% at $1,550.99 an ounce.

The bid for precious metals has weakened since the panic over possible hostilities between the U.S. and Iran passed, but gold is still trading some $70-$80 above the range it was in at the end of 2019.

Continued support is likely from investors in Europe, who are facing a supply shortage of government bonds this year. The post-crisis flood of sovereign debt is slowly maturing, and smaller budget deficits are keeping new issuance scarcer.

A new bond auction in Spain fetched a record high demand for any euro government bond, while a 30-year bond issued by Italy on Wednesday fetched over 44 billion euros in orders – despite the latent risk that Italy may not be sharing a currency any more with Germany by the time that bond matures. Germany posted another big government surplus in 2019 equal to 1.9% of gross domestic product, figures released Wednesday showed. The contrast with Italy’s public debt profile could hardly be sharper.

Government bond yields fell across Europe and the U.S. on Wednesday, as weak German GDP numbers, even weaker inflation data from the U.K. and slightly below-expectations producer price data from the U.S. all painted a bleak economic picture.

If gold isn’t making bigger headway against such a favorable backdrop, it may be because end-buyers are still reluctant to buy at what are still-elevated levels.

In a report published Wednesday, the World Gold Council said it expects central bank purchases to be lower than in recent quarters (they have been falling since June last year), although it said it still expects purchases to be “robust”.

In addition, the WGC said, final demand from jewelry buyers in India is still laboring under the increase of gold import duty as part of a general hike in the goods and services sales tax last year.

“In all, we believe consumer and gold trade sentiment may remain soft through 2020,” the WGC said.

Elsewhere Wednesday, silver futures rebounded 1.2% to $17.96 an ounce, while platinum futures rose 3.3% to a two-year high of $1,019.80.

Copper futures were down 0.5% at $2.86 a pound.

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