Gold rises as global growth fears boost safer assets

Gold rose on Monday, trading near last week's six-month high, as concerns about a possible US government shutdown and global growth weighed on the dollar and equity markets, boosting the appeal of assets viewed as safer, such as bullion.

Spot gold gained 0.5 percent to $1,262.70 per ounce, as of 1306 GMT in thin trade ahead of the Christmas break. The metal hit its highest since late June at $1,266.40 on Thursday. US gold futures were 0.6 percent higher at $1,265.40 per ounce.

Global stocks were set for their seventh straight session of losses as fears over a US government shutdown, which could continue into January, weighed on risk sentiment at a time when the global economy is showing signs of faltering.

“There is growing confidence on gold in 2019,” said ActivTrades chief analyst Carlo Alberto De Casa. “Gold is expected to play a key role in 2019 as a safe haven given the fears of further falls in stock markets and expectation for a more dovish US Federal Reserve.”

Fed Chairman Jerome Powell said last week that policymakers would be “patient” in determining future rate hikes amid expectations the US economy will slow next year and inflation is likely to stay below the Fed's 2 percent target in 2019.

Fresh economic forecasts showed officials at the median now see only two more rate hikes next year compared with the three projected in September.

Lower interest rates reduce the opportunity cost of holding bullion and weigh on the dollar. The US unit was 0.2 lower against a basket of major currencies.

“Gold continues to look bullish as we enter into what is widely expected to be a tough year for both the dollar and wider equity markets,” said Craig Erlam, an analyst at OANDA, adding that $1,300 will be the next big test for the yellow metal. Gold, which is seen as safe investment during political and financial uncertainty, has risen about 9 percent from a 19-month low of $1,159.96 in mid-August.

“I think gold will try to hold the level of $1,260. The medium term target seems to be $1,300, while we could expect an intermediate resistance at $1,280-1,285,” ActivTrades' De Casa said.

Investors' increased interest in gold is underpinned by an increase in net longs by speculators and a rise in holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund.

Hedge funds and money managers raised their net long positions in Comex gold to a six-month high in the week to Dec. 18, while SPDR holdings rose to their highest since mid-August on Friday. Among other metals, palladium eased 0.4 percent to $1,227.10 per ounce.

Silver rose 0.5 percent to $14.67 an ounce, while platinum gained 0.2 percent to $788.74 per ounce.