Gold prices rose on Monday as the dollar fell on expectations that the U.S. Federal Reserve will not raise rates this year and as Asian stocks tumbled after lacklustre China data pointed to a slowdown in the world’s second-largest economy.
Gold tends to gain on expectations of lower interest rates, as they reduce the opportunity cost of holding a non-yielding bullion and trim the demand for U.S. dollar, making the yellow metal less expensive for holders in other currencies.
Spot gold was up 0.3 percent at $1,291.68 per ounce, as of 0735 GMT, while U.S. gold futures were up 0.2 percent at $1,292 per ounce.
The weakness in equities and U.S. dollar appear to be providing support for gold, said Michael McCarthy, chief strategist, CMC Markets and Stockbroking.
“The market feels there is a shift in the Fed’s stance and it is more accommodative and we are seeing the dollar weakening for several sessions.”
The U.S. central bank had the ability to be patient on monetary policy given stable price measures, U.S. Federal Reserve Chairman Jerome Powell said last week, and he downplayed predictions from policymakers suggesting interest rates would be raised twice more this year.
“The (gold) market is cautious ahead of data flows that might revise the recent very dovish outlook,” said Nicholas Frappell, global general manager at ABC Bullion, adding that the metal was facing a resistance around $1,300 level.
Meanwhile, Asian shares tumbled on Monday after a shock contraction in Chinese December exports, which fell 4.4 percent from a year earlier, the biggest monthly drop in two years.
Spot gold has gained over 11 percent since hitting a 1-1/2-year low in mid-August at $1,159.96 due to volatile stock markets and a weaker dollar.
“The geopolitical risks have also started to induce some safe-haven buying. Investors are becoming increasingly worried about the Brexit negotiations. At the same time, there appears no end in sight for the U.S. government shutdown,” ANZ said in a note.
UK Prime Minister Theresa May must win a vote in parliament on Tuesday to get her Brexit deal approved, while a partial U.S. government shutdown over President Donald Trump’s demand to build a wall along the U.S.-Mexico border entered its 24th day on Monday, with no end in sight.
Spot gold remains neutral in a range of $1,279-$1,299 per ounce, and an escape could suggest a direction, according to Reuters technical analyst Wang Tao.
Among other precious metals, palladium fell 0.6 percent to $1,309.70 an ounce. It hit a record high at $1,342.43 last week.
Platinum fell 1.8 percent to $795.75, while silver dropped 0.2 percent to $15.57 an ounce.
