The gold price held on to its highest level in more than a month on Friday, boosted by a weakening Chinese economy and a softer US dollar.
The spot gold price was last at $1,150.5/1,150.9, down $4.40 on the previous close, but around its highest in more than a month.
Trade has ranged from $1,150.3 to $1,168.4 – its highest since July 7 – so far.
“Gold prices are leading a broad based rally in the precious metals driven by safe-haven demand, but in turn that is likely to be fuelled by short-covering,” William Adams, FastMarkets head of research, said.
“As the fund gross short positions have become large there may well be room for considerable rallies,” he added.
The advance in gold prices was largely driven by the dovish Federal Reserve July meeting minutes and as traders scaled back their views on a US interest rate rise in September.
According to the Fed Fund Future, a rate hike in September has been virtually priced out, and a rate hike by year’s end is regarded as only 75 percent probable.
“It would appear that the yellow precious metal is not quite so useless after all when things get turbulent on the markets,” Commerzbank noted.
Still the bank warned investors not to get too carried away.
“We would warn against assuming that prices will continue to perform as they have done in recent days, however,” it said. “If interest rate expectations were to shift again, gold could come under renewed pressure,” it added.
Overnight, Caixin – previously HSBC – flash manufacturing PMI undershot expectations at 47.1 – below the 50 contraction level. It was the lowest reading since March 2009.
Equities are in retreat once again this morning as Chinese data added to concerns about global economic growth.
“Investors looking to rotate out of strong markets may well look for oversold asset classes, such as gold, to park their profits while corrections are underway,” Adams noted.
The dollar index is falling as well – it was last at 95.55.
Elsewhere, the Greek Prime Minister Alexis Tsipras resigned and called for a snap election in September.
The economic data is focused on flash PMI numbers today – already released EU flash manufacturing and flash service PMI data was as expected at 52.4 and 54.3, respectively. The US also has flash manufacturing PMI scheduled.
Meanwhile, inflows in gold ETF holdings accelerated – holdings in funds tracked by FastMarkets have increased to 1,526.70 tonnes.
As for the other precious metals, silver was little changed at $15.37/15.42. Platinum at $1,021/1,026 fell $10 and palladium at $601/606 was down $20.
(Editing by Kathleen Retourne)
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