Gold rose 1% on Wednesday as an inversion in the U.S. Treasury yield curve and poor economic data from the euro zone stoked fears of a recession and drove investors to the safe-haven bullion.
The U.S. Treasury yield curve inverted for the first time since 2007, a sign that the world's biggest economy could be heading for a recession.
"With major economies in the euro zone reporting negative growth, it's possible we will see a recession. So, for gold in particular, it increases expectations of what the U.S. Federal Reserve will do in terms of easing" interest rates, said Jeff Klearman, portfolio manager at GraniteShares.
"Nothing in the immediate future is working against gold; there may be bouts where gold retraces, but the trend is upwards."
The euro zone's GDP barely grew in the second quarter of 2019 as economies across the bloc lost steam and the largest, Germany, contracted due to a global slowdown driven by trade conflicts and uncertainty over Brexit.
This came after data showed growth in China's industrial output in July rose at the slowest pace in more than 17 years.
Global stocks fell on the renewed recession risks, undoing gains from the previous session driven by Washington's decision to delay tariffs on some Chinese goods that had been slated to begin next month.
"Geopolitics also remains close to the front burner of the marketplace, which is also supporting gold and silver," Jim Wyckoff, senior analyst with Kitco Metals, wrote in a note, adding "the civil unrest in Hong Kong remains in focus among traders and investors worldwide."
In a volatile session on Tuesday, gold initially jumped to an over six-year high of $1,534.31 due to the unrest in Hong Kong and a slump in Argentina's peso, before reversing course to fall 2% on the signs of a thaw on the U.S.-China trade front.
Investors now await the U.S. Federal Reserve's annual conclave in Jackson Hole, Wyoming, next week for clues on the future trajectory of interest rates. Traders see a 68.8% chance of a 25-basis-point rate cut by the U.S. central bank next month.
Elsewhere, silver gained 1.2% to $17.17 per ounce, after hitting its highest since January 2018 in the previous session. Platinum slipped 0.7% to $846.38 an ounce, while palladium dipped 1.7% to $1,430.83.