Investing.com - Gold prices inched up on Tuesday while the dollar remained largely unchanged following reports that the International Monetary Fund (IMF) cuts its global economic growth forecasts for 2018 and 2019.
Gold futures for December delivery on the Comex division of the New York Mercantile Exchange was up 0.5% at $1,193.90 a troy ounce by 1:50AM ET (05:50 GMT).
The fund said in its updated World Economic Outlook that it was now expecting growth of 3.7%, down from the 3.9% growth it forecast in July. It was the first downgrade since July 2016.
Worsening financial conditions and capital outflows were putting pressure on emerging markets, while escalating trade tension between the U.S. and its trade partners also clouded global economic outlook, the IMF said.
"U.S. growth will decline once parts of its fiscal stimulus go into reverse," IMF chief economist Maurice Obstfeld said in a statement. "Notwithstanding the present demand momentum, we have downgraded our 2019 U.S. growth forecast owing to the recently enacted tariffs on a wide range of imports from China and China’s retaliation."
The fund also reduced its growth outlook for China to 6.2% from 6.4% for the year 2019.
Meanwhile, the U.S. dollar index that tracks the greenback against a basket of other currencies was unchanged at 95.44.
“Gold is getting some support from bargain hunting and also some safe-haven support on concerns of a potential sell-off in equities,” said Stephen Innes, Asia-Pacific trading head at Oanda in Singapore.
“I strongly believe the market is underpricing the potential for equity markets to derail. This is a key hedge for gold in my view.”
Gold has fallen more than 13% since April, with a stronger dollar and rising Treasury yield cited as catalysts for the selling.
The Fed added a quarter point in the final week of September to bring rates to between 2.0% and 2.25% and indicated another increase in December. Fed Chairman Jerome Powell said last week that rates may rise above an estimated "neutral" setting as the economy continues to grow.