Gold at a two-week high on weak US data

Gold rose to a two-week high on Friday, holding above the $1,500/oz psychological level, as weak US economic data spurred expectations for another interest rate cut by the Federal Reserve later in October, while palladium scaled a fresh peak.

Spot gold hit its highest since October 10 at $1,504.35/oz, but was down slightly by 3.12am GMT, at $1,501.70/oz. The metal has gained 0.8% this week, heading for its biggest weekly gain since the week ended August 20. US gold futures were flat at $1,505/oz.

This is the second time in the past two weeks that spot gold has crossed the $1,500/oz level. The metal breached the ceiling for the first time in more than six years on August 7 and hit a record high of $1,557/oz on September 4.

New orders for US-made capital goods fell more than expected in September and shipments also declined, a sign that business investment remains soft amid the fallout from the US-China trade war, data showed on Thursday.

The US Federal Reserve has cut interest rates twice in 2020 and investors see another cut on the cards as the economy struggles with the headwinds from the long-drawn trade war and slowing global growth.

“Gold still has a number of geopolitical uncertainties and a high chance of a Fed rate cut at the end of this month to get support from, but considering the Sino-US trade tensions are easing, any fresh positive development will weigh on prices,” said Argonaut Securities analyst Helen Lau.

“Today, we see some traders booking profit after prices broke the rangebound upper level of $1,500 as data showed a further slowdown in the US economy.”

Gold is often seen as a safer investment during times of political and financial uncertainty.

In Europe, Prime Minister Boris Johnson called for a general election on December 12 to break Britain’s Brexit impasse, conceding he will not meet his “do or die” deadline to leave the EU next week.

Asian shares inched higher on Friday, tracking small gains in global markets, as positive earnings helped to offset economic growth concerns, while sterling weakened as the prospect of a British election added fresh uncertainty to the Brexit drama.

China’s net gold imports via Hong Kong fell 9% in September from the previous month, mainly due to softer demand and expectations of possible measures by Beijing to prop up its yuan currency.

Holdings of the largest gold-backed exchange-traded-fund (ETF), New York’s SPDR Gold Trust, fell 0.13% on Wednesday from Tuesday.

Elsewhere, palladium hit an all-time high of $1,785.50/oz on supply concerns and was last up 0.2% at $1,780.55/oz.

Palladium is crucial in the making of catalytic converters used in exhaust systems of vehicles, and concerns over its supply running out have helped lift prices by more than 41% this year alone, despite a weakening automotive sector.

Silver rose 0.1% to $17.80/oz. Platinum was up about 0.1% at $924.40/oz, after scaling a more than three-week high in the previous session.

Reuters