Investing.com - Gold prices edged lower on Tuesday, as global equity markets and the U.S. dollar rebounded from a brutal selloff in the prior session.
Gold futures for December delivery on the Comex division of the New York Mercantile Exchange shed $5.00, or 0.43%, to trade at $1,148.60 a troy ounce during European morning hours.
A day earlier, gold rallied to $1,169.80, the strongest level since July 7, before turning lower to end at $1,153.60.
Germany's DAX rallied 3% on Tuesday, while France’s CAC 40 and London's FTSE 100 were both up around 2%, one day after suffering their worst selloff in nearly seven years.
Meanwhile, U.S. stock futures gained more than 3%, signaling that Wall Street will open stronger later in the day, as markets begin to recover from sharp losses the previous day.
Global equity markets plunged on Monday as fears of a China-led global economic slowdown spooked traders and rattled sentiment.
Worries over China's economy lingered after the Shanghai Composite tumbled more than 7% on Tuesday, one day after suffering its biggest one-day drop since February 2007.
Investors continued to dump Chinese shares amid disappointment that Beijing has held back from implementing fresh measures to support stocks.
Chinese equities have lost nearly 30% over the past two weeks amid growing fears over China's slowing economy and worries that Beijing may allow the yuan to continue to depreciate.
Financial markets have been roiled since China devalued the yuan on August 11, sparking a selloff in equities, commodities and emerging-market assets.
Meanwhile, the U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was up 0.35% early Tuesday to 93.70.
The dollar plunged almost 2% on Tuesday to hit 92.52, the weakest level since January 21, as mounting uncertainty over the global growth outlook and the subdued U.S. inflation outlook prompted investors to push back expectations for an initial rate hike by the Federal Reserve.
Some traders believe the U.S. central bank could postpone raising interest rates until December, as officials are likely to remain concerned over weak global growth and inflation pressures due to China’s shock currency devaluation move and plunging oil prices.
A delay in raising interest rates would be seen as bullish for gold, as it decreases the relative cost of holding on to the metal, which doesn't offer investors any similar guaranteed payout.
Elsewhere in metals trading, copper for September delivery on the Comex division of the New York Mercantile Exchange inched up 0.2 cents, or 0.08%, to trade at $2.261 a pound during morning hours in London.
A day earlier, copper futures tumbled to $2.209, a level not seen since July 2009, before recovering slightly to end at $2.259, down 4.4 cents, or 1.93%, as steep declines on Chinese stock markets dampened appetite for the red metal.
Market players are concerned that the plunge in the stock market could spread to other parts of the Chinese economy, triggering fears that the Asian nation's demand for the industrial metal will decline.
China is the world’s largest copper consumer, accounting for almost 40% of world consumption last year.