PRECIOUS-Gold steadies near three-month high as global economy concerns persist

Published 2016-02-02, 07:45 a/m
© Reuters.  PRECIOUS-Gold steadies near 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
* Unclear signals on US rate outlook caps upside

(Updates prices)
By Susan Fenton
LONDON, Feb 2 (Reuters) - Gold steadied after touching a new
three-month high on Tuesday, still supported as global growth
concerns 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 volatility in oil and other
assets is supporting gold, typically a haven from market
turmoil.
"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 then pulled back slightly to trade down 0.4
percent at $1,124.31 by 1221 GMT.
A break above $1,136 could lift gold towards $1,157, a level
reached in late October, ScotiaMocatta technical analysts said.
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.
But the upside for gold has been limited however as the Fed
still kept the door open for a rate hike in March. The
opportunity cost of holding gold rises in a higher interest rate
environment.
Federal Reserve Vice Chairman Stanley Fischer said on Monday
the U.S. economy could suffer if recent volatility in financial
markets persists and signals a slowdown in the global economy.

"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 percent to $861.09 an ounce,
palladium XPD= also slipped 0.5 percent to $497.95 and silver
XAG= dropped 0.3 percent to $14.27.

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