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PRECIOUS-Gold climbs to 3-month high on weak economic data, dollar

Published 02/02/2016, 06:47 am
© Reuters.  PRECIOUS-Gold climbs to 3-month high on weak economic data, dollar
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* Gold climbs to 3-month high after gaining 5 pct in January

* China official manufacturing PMI at lowest since 2012

* Global stock markets, U.S. dollar fall (Updates prices; adds comment, second byline, NEW YORK dateline)

By Marcy Nicholson and Eric Onstad

NEW YORK/LONDON, Feb 1 (Reuters) - Gold rose to a three-month high on Monday, extending its recent rally on worries about global economic growth and hopes for easier monetary policy after weak factory data in Asia and Europe.

China's official measure of manufacturing in January fell to the lowest since mid-2012, while factory growth across the euro zone slowed. China data was disappointing, very weak in both manufacturing and non-manufacturing, which coupled with the ongoing turmoil on global markets and uncertainties about growth going forwards have helped gold to get above the $1,115/20 resistance level," said Robin Bhar, head of metals research at Societe Generale (PA:SOGN) in London.

Data also showed that U.S. manufacturing activity was unlikely to recover in the near term, while consumer spending was flat in December. gold XAU= was up 1 percent at $1,128.40 an ounce at 2:32 p.m. EST (1932 GMT), after rising to $1,128.70, the highest since Nov. 3, just short of the 200-day moving average around $1,130 an ounce.

U.S. gold for April delivery GCcv1 settled up 1 percent at $1,128 an ounce.

Also supporting prices were the weak U.S. dollar .DXY against a basket of major currencies and comment by Federal Reserve Vice Chairman Stanley Fischer, who said that persistent volatility could hurt U.S. growth and inflation. USD/ remarks seem to show some softening in his tone toward rate hikes, as he notes that he simply 'does not know' whether a March hike will be appropriate," said Royce Mendes, director and senior economist at CIBC Capital Markets.

"He concedes that financial market volatility could delay the tightening that he had anticipated earlier in the year."

Hopes that the Fed will slow the pace of future U.S. rate increases has aided gold by cutting the opportunity cost of holding it and keeping a lid on the dollar.

"In the longer term, we still expect the dollar will go higher ... and we still have three (U.S. interest rate) hikes in our scenario, but there is uncertainty around that ... and gold has benefited," ABN Amro analyst Georgette Boele said.

Global stock markets and oil prices fell following the weak manufacturing reports. MKTS/GLOB

Holdings of the largest gold-backed exchange-traded fund (ETF), New York's SPDR Gold Trust GLD , increased by about 4 percent in January, the most in a year.

Spot silver XAG= rose 0.7 percent to $14.36 an ounce while palladium XPD= was up 0.7 percent at $502.01 an ounce. Spot platinum XPT= was down 0.4 percent at $867 an ounce.

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