Gold rises as global growth fears boost safer assets

BENGALURU: Gold rose on Monday, trading near last week's six-month high, as concerns about a possible U.S. 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 was up 0.4 percent at $1,260.64 per ounce, as of 1100 GMT. The metal hit its highest since late June at $1,266.40 on Thursday.

U.S. gold futures gained 0.5 percent to $1,264.20 per ounce.

Global stocks were set for their seventh straight session of losses as fears over a U.S. 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 U.S. Federal Reserve."

Fed Chairman Jerome Powell said last week that policymakers would be "patient" in determining future rate hikes amid expectations the U.S. 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 dollar index was 0.2 lower against a basket of major currencies, making gold cheaper for holders of other currencies.

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," 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.

"We are seeing small physical demand and short-covering in gold," said Peter Fung, head of dealing at Wing Fung Precious Metals in Hong Kong, adding activity was thin before Christmas.

"We can see support around $1,250. Prices are likely to stay around the current levels until the end of this year."

Among other metals, palladium was up 0.1 percent at $1,233.41 per ounce.

Silver rose 0.5 percent to $14.67, while platinum  gained 0.7 percent to $792.10 per ounce.