Gold rallied 2 percent to a four-week high on Monday, buoyed by rising tensions in the Middle East and a sharp drop in stocks following weak Chinese data that fuelled concerns over global growth. Palladium, which as a largely industrial metal is more exposed than gold to economic weakness, dropped sharply, however, after Chinese manufacturing surveys undermined any hopes for a recovery in the sector.
Spot gold was up 1.4 percent at $1,074.80 an ounce at 2:09 pm EST (1909 GMT), after rising to a four-week high at $1,083.30, while US gold futures for February delivery settled up 1.4 percent at $1,075.20 an ounce. Spot gold is currently on track for its biggest one-day rise in a month. The metal initially rallied along with oil after Saudi Arabia cut diplomatic ties with Iran.
"The main driver here is the tension between Saudi Arabia and Iran, and the escalating conflict between these two countries," Commerzbank analyst Daniel Briesemann said. "Weak Chinese data, coupled with plunging stock markets, is probably also playing a role, but geopolitical tensions are the main thing here." Bullion prices came off their highs as oil futures turned negative and the US dollar extended gains in volatile dealings. Silver was up 0.5 percent at $13.86 an ounce, while platinum was down 1.1 percent at $880 an ounce. Palladium was down 4.1 percent at $538 an ounce.
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