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PRECIOUS-Gold hits new three-month high as global economy concerns persist

Published 2016-02-02, 05:39 a/m
© Reuters.  PRECIOUS-Gold hits new three-month high as global economy concerns persist
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* Likely further monetary easing would lift gold
* Gold has gained 6 pct this year
* Upside capped by lack of inflation

(Changes dateline, updates throughout)
By Susan Fenton
LONDON, Feb 2 (Reuters) - Gold touched a new three-month
high on Tuesday as concerns about the global economy and a
further drop in the oil price pushed investors towards
safe-haven assets.
Weak Chinese manufacturing data on Monday underscored the
challenges for the world economy and increased volatility in oil
and other assets is supporting gold.
"In the near term gold is finding some support in the dovish
tone from central banks last week, notably the Fed and the Bank
of Japan," said Jens Pedersen, senior analyst at Danske Bank.
The Bank of Japan's decision last week to introduce negative
interest rates helped lift the precious metal and it could see
more gains as some central banks may be forced into easing
monetary policy further this year to spur growth.
Spot gold XAU= touched $1,130.11 an ounce, its strongest
since Nov. 3, and was trading down 0.3 percent at $1,125.64 by
1006 GMT.
A break above $1,136 could lift gold towards $1,157, a level
reached in late October, said ScotiaMocatta technical analysts.
U.S. gold for April delivery GCcv1 was off 0.2 percent at
$1,126 an ounce.
Gold is typically the asset of choice in times of
uncertainty. It posted its best monthly jump in a year in
January, and has gained 6 percent so far in 2016, after falling
10.4 percent last year.
The Federal Reserve's statement after its policy meeting
last week that it will closely monitor the global economy and
financial markets lifted gold, as it underlined expectations
that U.S. policymakers may take it slow in raising interest
rates this year.
The U.S. economy could suffer if recent volatility in
financial markets persists and signals a slowdown in the global
economy, Federal Reserve Vice Chairman Stanley Fischer said on
Monday.
The opportunity cost of holding the metal would rise in a
higher interest rate environment.
The upside has been limited however as the Fed still kept
the door open for a rate hike in March.
"If the Fed had somehow closed the door on March due to the
turmoil we could have seen gold shoot higher," Pedersen said.
Reflecting growing confidence in gold, holdings of SPDR Gold
Trust GLD , the world's largest gold-backed exchange-traded
fund, rose to 21.9 million ounces on Monday, the most since Nov.
3. GOL/ETF
With interest rates close to zero, the "only option is to
move either towards zero or negative rates as the Japanese and
selected European countries are already doing in a desperate
attempt to force banks to lend", INTL FCStone analyst Edward
Meir wrote to clients.
"Whatever the case, this should be constructive for gold."
Spot platinum XPT= fell 1.2 percent to $859.61 an ounce,
palladium XPD= also slipped 1.2 percent to $494.25 and silver
XAG= dropped 0.3 percent to $14.28.

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