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PRECIOUS-Gold hits three-month high on shaky global economy

Published 02/02/2016, 05:45 pm
Updated 02/02/2016, 05:50 pm
PRECIOUS-Gold hits three-month high on shaky global economy
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* Likely further monetary easing would lift gold

* Gold has gained 6 pct this year

* Coming up: euro zone unemployment rate at 1000 GMT (Updates prices)

By Manolo Serapio Jr

MANILA, Feb 2 (Reuters) - Gold edged to a three-month high on Tuesday as weak global manufacturing activity underscored the challenges for the world economy, pushing investors towards safe-haven assets.

Increased volatility in other assets has benefitted gold and it could see more gains as global central banks may be forced into easing monetary policy further this year to spur growth.

With 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 gold XAU= touched $1,130.11 an ounce, its strongest since Nov. 3, and was trading down 0.3 percent at $1,125.36 by 0634 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.

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

Global manufacturing expansion accelerated slightly but remained weak at the start of 2016 as faster growth in developed markets failed to offset a contraction in emerging economies. In China, a gauge of factory activity fell to its lowest since mid-2012. 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. 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 Fed's statement last week that it will closely monitor the global economy and financial markets lifted gold to near $1,130, as it underlined expectations that U.S. policymakers may take it slow in raising interest rates this year.

"Weaker macro numbers out of the U.S. are also increasing the odds that the Fed's December move could have been an outlier, forced onto a central bank that basically had to move after promising to do so for much of the last year," said Meir who sees only one U.S. rate hike this year.

Spot platinum XPT= fell 1.1 percent to $860.10 an ounce, palladium XPD= slipped 0.6 percent to $497.30 and silver XAG= dropped 0.3 percent to $14.28.

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