* China PMI surveys show manufacturing weakest in years
* Coming up: U.S. ISM manufacturing PMI at 1400 GMT
(Updates prices, adds comment)
By Clara Denina
LONDON, Sept 1 (Reuters) - Gold rose one percent on Tuesday
as the dollar and global equities dropped on fresh signs of
economic weakness in China and uncertainty over the timing of
the Federal Reserve's first interest rate increase in nearly a
decade.
Activity in China's factory sector shrank at its fastest
rate in at least three years in August as domestic and export
orders tumbled, increasing investor concern that the world's
second-largest economy could be lurching towards a hard landing.
ID:nL4N11721X
Spot gold XAU= rose to a session high of $1,147.16 an
ounce and was up 0.9 percent at $1,144.42 an ounce by 1339 GMT,
while U.S. gold for December delivery GCcv1 also gained 1
percent to $1,144.00.
The metal posted its biggest weekly drop in five last week,
weighed by a steady dollar and strong U.S. economic data,
supporting the case for a rate rise as early as this month.
Gold, which is on track for a 4 percent fall this year,
would suffer from higher interest rates because they would
increase the opportunity cost of holding the metal. Conversely,
a delayed rate increase would relieve some selling pressure, if
only temporarily.
"As long as the Chinese growth anxieties are there, the Fed
will have to find some other remedy for their itching to raise
the interest rate," said Naeem Aslam, chief market analyst at
AvaTrade. "All in all, in the short term we could see another
leg up for gold, but nothing mammoth."
The dollar .DXY fell 0.2 percent against a basket of
leading currencies, largely because investors prefer
low-yielding currencies such as the euro and the Japanese yen
for better returns. MKTS/GLOB
"Gold ...may be vulnerable in the short term should the
'run' for cash create selling for margin and liquidity
purposes," Kitco Metals Inc said in a note.
Doubts over whether the Federal Reserve will raise rates at
its Sept. 16-17 policy meeting have resurfaced in light of
persisting market turbulence in recent weeks.
But comments from the U.S. central bank's Vice Chairman,
Stanley Fischer, last week suggested that a September rate hike
remains an option.
Later on Tuesday investors will turn their attention to a
survey of U.S. manufacturing activity, but the biggest focus of
the week is the August non-farm payrolls report on Friday.
ECONUS
"The importance of this week's employment report is somewhat
elevated given the lack of clearer signals from the recent
Jackson Hole symposium - comments from Vice Chairman Fischer
seemed to focus on trying to keep the Fed's options open," UBS
said in a note.
Spot palladium XPD= was down 2.1 percent at $587.50 an
ounce and platinum XPT= was unchanged at $1,006.50. Silver
XAG= was also flat at $14.57.