Gold gains on pre-holiday trade as economic growth fears persist

By Karthika Suresh Namboothiri
Updated
FILE PHOTO: Employees process ingots of 99.99 percent pure gold at the Krastsvetmet non-ferrous metals plant in the Siberian city of Krasnoyarsk

By Karthika Suresh Namboothiri

(Reuters) - Gold prices rose to a 1-1/2 month peak on Tuesday as investors clung to the safe haven metal on lingering recessionary fears and as a hedge against soaring equities, while Christmas Eve drew thin trade across the board.

Spot gold gained 0.9% to $1,497.99 per ounce as of 10:55 a.m. ET (1551 GMT), hovering close to the highest level since Nov. 5.

U.S. gold futures were up nearly 1% at $1,502.30.

"There are still unresolved issues," said Edward Meir, analyst at ED&F Man Capital Markets, referring to the U.S.-China trade deal, political uncertainties in North Korea and U.S.-European trade negotiations.

"We are still not seeing good (U.S.) numbers come out of the business investment side. We are wholly dependent on consumer spending. But when consumer spending starts to flag a bit, then the economy could really start to slow down more noticeably."

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

The markets keenly watch data from the United States for cues on the U.S. central bank's future monetary trajectory. Gold is sensitive to rising interest rates, which lift the opportunity cost of holding it.

Meanwhile, optimism on U.S.-China trade talks has lifted equities to record levels. World stocks flatlined near record highs and remained on track for their best year in a decade, while Wall Street dipped from near-record levels.

"The stock market is getting very overbought. If you have a correction in stocks, gold could benefit," Meir added.

U.S. President Donald Trump said on Tuesday he and Chinese President Xi Jinping will have a ceremony to sign the first phase of the U.S.-China trade deal agreed to this month.

The 17-month long trade dispute has prompted a 16% boost to gold prices this year, with the metal on track for its best year since 2010.

Elsewhere, palladium rose 0.2% to $1,879.49 an ounce. Platinum inched 0.6% higher to $941.70, while silver gained 1.6% to 17.70 an ounce. Silver was set for a fifth straight session of gains.

(Reporting by Karthika Suresh Namboothiri in Bengaluru; Editing by Steve Orlofsky)