On Monday, prices for gold increased as stocks globally weaken. Data showed that China's exports dropped signifying that the world's second-largest economy weakens and it prompts investors to look for alternatives in gold.
At 1:48 p.m. ET, Spot gold increased by 0.3 percent reaching $1,291.39 per ounce while U.S. gold futures also increased by $1.80 at $1,291.30 per ounce.
Edward Meir, an INTL FCStone analyst, said that the fact that u.S. stocks have opened lower and weak macro numbers from China on the trade figures have been helpful for gold. He added that the faltering stock markets and weak Chinese data imply economic conditions could worsen during the course of the year.
Data showed that Chinese imports recorded its most drops in two years in December alongside with its tightening imports. The import and export data implies a sharper slowdown in global growth. Gold is often used as a hedge against uncertainty in world economy and politics. The gains in gold are affected by the growing concerns in an impending Brexit vote from the European Union and a prolonged government shutdown in the United States.
Walter Pehowich, executive vice-president of investment services at Dillon Gage Metals, noted that if the partial government shutdown in the United States continues, it will eventually weigh heavily on equity prices, sending more investors over to the gold and bond markets.
Records show that Spot gold has gained at least 11 percent since its lowest record within a year in a half in mid-August at $1,159.96. Mr. Meir said that the extension of the government shutdown and the subsequent slowdown in the economy of the United States contributes to the fact that the U.S. Federal Reserve will likely not raise rates at all this year.
Fed Chairman Jerome Powell propped up gold last week as he reaffirmed that the central bank could remain patient on monetary policy and downplay suggestions that interest rates would be raised twice more this year.
Investors are speculating on the developments of the trade negotiations between the U.S. and China. U.S. officials are expecting a visit from Chinese trade negotiators this month after prior discussions between the two countries ended positively.
Aside from gold, precious metals including palladium also increased. The metal rose by 0.33 percent to $1,322.35 an ounce. The gain is just below its all-time high of 1,342.43 last week. JP Morgan said in a note that Palladium has continued its march higher but $1,350/oz appears to be a pretty significant technical level.
