Spot gold gained 0.3 percent to $1,316.40 per ounce as of 0800 GMT, while U.S. gold futures also added 0.3 percent to $1,316.50 an ounce. The metal last week posted its third consecutive weekly gain and rose 1 percent, the most since the week ended Feb. 1. Investors dumped shares and fled to the safety of bonds, while the Japanese yen hovered near a six-week high.
“Market is in a risk aversion mode. It seems that the data from Friday night, of U.S. and Europe, didn’t come as expected,” said Michael McCarthy, chief market strategist, CMC Markets.
Data on Friday showed that U.S. manufacturing activity unexpectedly cooled in March and businesses across the euro zone performed much worse than expected this month, fanning concerns on global growth. “If data continues to be as weak as forecast then there is very good chance we could see significant higher gold prices,” McCarthy said, adding that the inversion of yield is a sign of concern.
Yields on benchmark U.S. 10-year treasury notes fell further below three-month rates in Asia, an inversion that has in the past signalled the risk of economic recession. The yield curve inverted on Friday for the first time since mid-2007. Lower yields reduce the opportunity cost of holding non-yielding gold and weigh on the dollar. A weaker dollar makes bullion cheaper for non-U.S. investors.
Chicago Federal Reserve Bank President Charles Evans said on Monday that it is a good time for the U.S. central bank to pause and adopt a cautious stance, adding that he did not expect any interest rate hikes until the second half of next year. “Gold is set to make another run for the $1,350 price level that has proved resilient,” OANDA said in a note.
“Volatility fuelled by uncertainty and with plenty of Fed speakers expected to reinforce the dovish rhetoric from the central bank, the U.S. dollar will be limited on the upside.” Indicating appetite for the safe-haven bullion, holdings in the world’s largest gold-backed exchange-traded fund, SPDR Gold Trust, rose about 1 percent in the previous week.
Investors also raised their bullish wagers in COMEX gold in the week to March 19, the U.S. CommodityCommodity Futures Trading Commission (CFTC) said on Friday. Among other precious metals, palladium slipped 1 percent to $1,547.90 per ounce. Silver gained 0.5 percent to $15.49, while platinum was up 0.4 percent at $847.50 an ounce.