Gold hovers near 2-week low on hopes of economic recoveryGold hovers near 2-week low on hopes of economic recovery
FILE PHOTO: A Saudi jeweller wearing a protective face mask arranges gold jewellery at a store in Riyadh

By Harshith Aranya

(Reuters) – Gold was trading near a two-week low on Wednesday as optimism around several economies re-opening dulled the metal’s safe-haven appeal, although increasing Sino-U.S. frictions over Beijing’s proposed security law for Hong Kong tempered losses.

Spot gold eased 0.1% to $1,710.01 per ounce by 0301 GMT, trading near last session’s low of $1707.10, when prices dropped as much as 1.3%. U.S. gold futures were also down 0.1% to $1,703.20.

“What we saw over the preceding 24 hours was a break of relatively meaningful support at about $1,715,” said DailyFx currency strategist Ilya Spivak.

“The positive story seems to be easing of restrictions and (that) there will be some sort of rebound in economic activity… but, there is (also) a lot of negativity. Tension between the U.S. and China is a huge risk.”

Asian shares shed some of their recent gains after U.S. President Donald Trump said on Tuesday Washington was working on a strong response to China’s planned national security law for Hong Kong, adding it would be announced before the end of the week.

Despite the pullback in bullion prices, the outlook remains positive for gold, which is seen as a safe-haven asset during political and economic uncertainties, analysts said.

“The biggest risk is people getting complacent and forgetting that the long term consequences of this lockdown are not going away anytime soon and we aren’t going to have the perfect economy,” Spivak added.

Economic prospects for the developed world this year have darkened again in the past month, with a V-shaped sharp recovery expected by less than one-fifth of economists polled by Reuters.

Palladium fell 1% to $1,937.38 per ounce, platinum slipped 0.5% to $825.90, and silver inched down 0.1% to $17.08.

(Reporting by Harshith Aranya and K. Sathya Narayanan in Bengaluru; Editing by Devika Syamnath)