By Susan Fenton
LONDON (Reuters) – Gold steadied on Tuesday, after touching its highest level in more than seven months the previous day as rising concerns about the global economic outlook hammered shares and sent investors rushing into safer assets.
While those concerns persisted, European shares stabilised and gold saw some profit taking after failing to push through key resistance at $ 1,200 an ounce.
Spot gold was trading at $ 1,187.6 an ounce, down 0.3 percent, by 0925 GMT, after rising to $ 1,200.60 on Monday, its strongest since June 22 last year.
Gold has gained more than 6 percent since the start of last week on rising demand for assets deemed to be less risky.
“For the time being we continue to see the safe-haven demand being supportive for gold. The next key level is $ 1,200 but it is looking in overbought territory,” said Citigroup analyst David Wilson. “We suggest it consolidates (first) between $ 1,150 and where we are now.”
Strong demand for safe assets was underscored on Tuesday when the yield on Japan’s benchmark 10-year government bond turned negative for the first time as the Nikkei stock index tumbled more than 5 percent, its biggest daily drop in nearly three years.
The Japanese yen, also seen as a safe haven, reached its highest against the dollar since November 2014.
Fears that the global economy could slow sharply, or even tip into recession, and worries about some banks have battered share markets in recent days. European shares, however, were steadier on Tuesday with the pan-European FTSEurofirst 300, which slumped 3.4 percent on Monday, up 0.3 percent.
U.S. gold for April delivery was down 0.7 percent at $ 1,189 an ounce.
Underlining gold’s rising appeal, holdings in eight major gold exchange-traded funds (ETFs) rose to 43.3 million ounces on Friday, the highest since July 2015.
More significant was the rapid pace of inflows since the start of the year, having risen more than 8 percent and the biggest five-week surge since March 2011.
“We remain quite upbeat on gold’s prospects over the short term given the continued unease surrounding the global equity markets, the weaker dollar and gold’s much stronger technical profile,” INTL FCStone analyst Edward Meir said in a note.
The next stop for gold could be $ 1,205/$ 1,215 and further to $ 1,235, said Meir.
China’s markets are closed for the Lunar New Year holiday this week, dampening demand for gold.
Spot silver was up 0.1 percent at $ 15.32 an ounce, near Monday’s three-month high of $ 15.46. Platinum was down 0.3 percent to $ 923.31 an ounce, also near a three-month peak of $ 931.76 reached overnight. Palladium slipped 0.2 percent to $ 512.15 an ounce.
(Additional reporting by Manolo Serapio Jr. in Manila, editing by Louise Heavens)
