Gold hits 1.5 month high on soft U.S. data, trade deal worries

Gold rose to their highest in a month and a half on Tuesday, as soft economic data out of the United States and concerns about an interim Sino-U.S. trade deal lent support to the safe-haven bullion.

Spot gold rose 0.3 percent to $1,488.99 per ounce by 0340 GMT. Earlier in the day, prices hit their highest since November 7 at $1,489.52. U.S. gold futures also edged up 0.3 percent, to $1,492.80.

Data on Monday showed new orders for key U.S.-made capital goods barely rose in November and shipments fell, suggesting business investment will probably remain a drag on economic growth in the fourth quarter.

“The weaker U.S. economic data is starting to show up … there are still concerns that the current level of tariffs will continue to weigh on the U.S. economy as we enter into 2020,” said Stephen Innes, a market strategist at AxiTrader.

Adding to concerns, Canada’s economy unexpectedly shrank by 0.1 percent in October, the first monthly decline since February, partly because of a U.S. auto strike that hit manufacturing.

Gold is considered an alternative investment during times of political and financial uncertainty.

On the trade front, investors awaited further developments on the ‘phase one’ deal between the world’s top two economies.

“We are still not 100 percent clear if the ‘phase one’ deal will go through or not, it has not been signed yet … we then pivot to ‘phase two’ that suggests you need some gold, because we don’t know what the next phase is all about, how contentious of a deal that is going to be,” Innes added.

Gold was on track for its best year since 2010 with a 16 percent gain, mainly due to the 17-month tariff dispute that has roiled the global financial markets.

Even as Beijing and Washington have taken steps to defuse their dispute, they diverge on a slew of issues, including anti-government protests in Hong Kong and the treatment of Muslim Uighur minority.

Asian shares and U.S. stock futures darted in and out of losses on Tuesday as the holiday lull offset optimism of a trade deal.

Trading is expected to be subdued in many financial markets ahead of the Christmas holidays.

Elsewhere, silver rose 0.7 percent to $17.54 per ounce, after scaling its highest since November 7 at $17.57 earlier in the session.

Palladium was down 0.1 percent to $1,874.48 per ounce, while platinum was flat at $935.89.

Source: Reuters