· Gold prices edged higher on Tuesday after a steep fall in the previous session, as investors fretted about an economic slowdown amid weak global manufacturing data and U.S.-European trade ructions.

Spot gold was up 0.5% at $1,391.07 per ounce at 0603 GMT, after falling 1.8% in the previous session, its biggest one-day percentage decline since November 2016.

U.S. gold futures were up 0.4% to $1,394.4 an ounce.

· “The trade conflict is back to the centre stage today and the participants have shifted from U.S.-China to U.S and the European Union,” said Margaret Yang Yan, a market analyst at CMC Markets.

The United States on Monday ratcheted up pressure on Europe in a long-running dispute over aircraft subsidies, threatening tariffs on $4 billion of additional EU goods, on top of products worth $21 billion that were announced in April.

· Meanwhile, factory activity shrank across much of Europe and Asia in June, while growth in manufacturing cooled in the United States, keeping the world’s policymakers under pressure to avert a recession.

“Weak data gave investors a reminder of the recession risk ahead of us and that is part of the driver for safe haven,” Yan said.

· The rise in gold was capped by a strong dollar, which hovered near its highest in over a week, buoyed by an agreement between the United States and China to resume talks to resolve their trade war.

· The market will now focus on U.S. non-farm payrolls data due on Friday, which should help investors better assess whether the Federal Reserve will cut interest rates later this month.

· “The non-farm payrolls data will be the signpost for a 25 or 50 basis point cut by the central bank... But even a 25 basis point cut is supportive in the medium-term for gold,” said Stephen Innes, managing partner at Vanguard Markets.

Lower interest rates decrease the opportunity cost of holding non-yielding bullion and weigh on the dollar, making gold cheaper for investors holding other currencies.

· “Supportive price action should be evident towards $1,380-$1,375, the extension through to $1,360 is likely to provide entry levels for fresh bullish positioning,” MKS PAMP said in a note.

“We are again seeing inflows into ETF’s following the decline below $1,400.”

· Holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, rose 0.78 percent to 800.20 tonnes on Monday.

Elsewhere, silver rose 0.3% to $15.17 per ounce, while palladium was up 0.1% at $1,548.00.

Platinum gained 0.8% to $836.68, after touching a near seven-week high on Monday.

Reference: Reuters