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PRECIOUS-Gold near 3-month high as investors shun risky assets

Published 03/02/2016, 10:16 pm
Updated 03/02/2016, 10:20 pm
© Reuters. PRECIOUS-Gold near 3-month high as investors shun risky assets
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* SPDR Gold Trust holdings at highest since November

* Chinese buying gold ahead of Lunar New Year

* Coming up: U.S. ADP national employment at 1315 GMT (Updates throughout, changes dateline from MANILA)

By Clara Denina

LONDON, Feb 3 (Reuters) - Gold stabilised just below a three-month high on Wednesday, as the dollar edged lower and European shares tumbled, prompting investors to seek shelter in assets perceived as safer.

Holdings at the world's largest gold-backed exchange-traded fund (ETF), SPDR Gold Trust GLD , climbed to its highest since November at 22.04 million ounces on Tuesday, underlining growing interest in the metal. GOL/ETF

Spot gold XAU= was up 0.1 percent at $1,128.80 an ounce by 1108 GMT, within sight of Tuesday's peak of $1,130.30, its strongest since Nov. 3.

Gold has gained more than 6 percent so far this year, on concerns over the world's growth outlook, especially China, after losing 10.4 percent in 2015.

U.S. gold for April delivery GCcv1 was up 0.3 percent at $1,130.30 an ounce.

"We are now hitting up against the 200-day moving average of $1,130... but just a close above that level could help," Mitsubishi Corp analyst Jonathan Butler said.

"We are probably seeing enough of a risk hedge trade but it's difficult to see how gold is going to gain further strength without a major collapse in energy prices."

Oil stayed edged above $33 a barrel, but remained close to multi-year lows on Wednesday, while European shares dropped and the dollar was down 0.2 percent against a basket of main currencies. MKTS/GLOB

Global interest rates are likely to go even lower before they rise as financial market volatility and the spectre of deflation raise fresh doubts about central banks' ability to fulfil their mandates, policymakers and economists said. should be supportive for gold, an asset that thrives on uncertainty.

Expectations that the Federal Reserve may also go easy on raising interest rates amid the global economic headwinds had helped gold rise the most in a year in January.

"The market has completely priced out any meaningful interest rate rise within this year, now of course the payrolls on Friday may change that but there could also be some surprise on the downside from the data," Mitsubishi Corp's Butler said.

The next market focus is likely to be the release of the monthly U.S. nonfarm payrolls on Friday, which should give clues about the strength of the economy.

Buying from China, the world's top gold consumer, ahead of next week's Lunar New Year holiday, also supported bullion, said Brian Lan, managing director at Singapore-based gold dealer GoldSilver Central.

"There's not a lot of alternatives for China at the moment and funds are now moving to invest in gold," said Lan who sees gold sustaining its strength through the first quarter.

Spot silver XAG= rose 0.7 percent to $14.39 an ounce and palladium XPD= gained 1.3 percent to $495.10. Platinum XPT= was up 1.2 percent to $859.94.

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