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

Published 02/02/2016, 09:39 pm
Updated 02/02/2016, 09:40 pm
© 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. 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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