Gold jumped 1 percent to a more than three-month peak on Tuesday as investors took cover from a slide in global stocks and rising political and economic uncertainty, including concerns over Italy’s spending plans.
Palladium also soared to a record high on the back of increasing tensions between the United States and top producer Russia, with additional support from expected demand from the Chinese automotive sector.
Spot gold was up 1.1 percent at $1,235.03 an ounce at 1132 GMT, having touched its highest since July 17 at $1,236.58.
U.S. gold futures rose 1.1 percent to $1,238.20 as momentum proved strong enough to counter the rising dollar, which touched a two-month high.
“Rising risk aversion, falling stock markets and continued concerns regarding Italy are supporting prices,” said Commerzbank analyst Carsten Fritsch.
“Now we have risen above the 100-day moving average (around $1,224), which is key, so maybe we can see it rise to $1,250, which could be the next target.”
European shares were in the red after a slide in Asian markets, weighed down by negative sentiment over trade wars, Italy’s finances and unfolding events in connection with the killing of journalist Jamal Khashoggi in the Saudi Arabian consulate in Istanbul.
The European Commission decides on Tuesday on its next steps in the procedure for assessing Italy’s 2019 draft budget.
“We have a whole series of situations in connection with Saudi Arabia and Russia, and trade tensions between U.S. and China, and that has been having a knockdown impact on equities and in turn providing support to gold prices,” said Capital Economics analyst Ross Strachan.
Investor flows into bullion, often considered a safe store of value during times of economic and political uncertainties, also continued to increase.
Holdings at the world’s largest gold-backed exchange-traded fund, SPDR Gold Trust, rose 0.28 percent to 747.88 tonnes on Monday.
Meanwhile, palladium jumped about 1 percent to $1,131.72 an ounce after marking a record high of $1,143.
“Some market participants also hold U.S. President Trump’s planned withdrawal from the INF (Intermediate-Range Nuclear Forces) treaty responsible for the rise in the palladium price, arguing that Russia could restrict palladium supply in response,” Commerzbank analysts wrote in a note.
Among other precious metals, silver rose 0.7 percent to $14.71 while platinum was up 0.8 percent at $826.20.
