Gold steadied on Monday after paring losses as weak U.S. manufacturing data rekindled worries about a slowing economy, while palladium exceeded $1,860 per ounce in its week-long surge to new all-time highs on a supply crunch.
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Gold initially fell to a low of $1,453.60 per ounce on a stronger dollar and as better-than-expected manufacturing data from China propped up equities. However, U.S. stock indices dropped and the dollar slipped on data showing an unexpected drop on construction spending in October as investment in private projects tumbled to a three-year low.
"Market started the day on a risk-on tone, but got caught off guard when the ISM data was a bit weaker-than-expected. We saw equities, yields and the dollar all correct, which has helped gold a bit," said Ryan McKay, a commodity strategist at TD Securities.
World equities began the week on a strong footing after a private business survey showed Chinese factory activity expanded at the quickest pace in almost three years in November. However, markets reversed course following a report that U.S. President Donald Trump said he would immediately restore tariffs on U.S. steel and aluminium imports from Brazil and Argentina. Investors favor gold during times of global uncertainty.
"The notion is that the U.S. Federal Reserve is done cutting (interest rates) for now and we'll need to see a trend in weaker data through early 2020 to convince the market that we're going to get more cuts. Until then, there's no real impetus to see gold rally," McKay added.
The Fed cut rates three times this year and has one more meeting on Dec.10-11. However, investors now see the Fed keeping interest rates unchanged until at least mid-2020. Markets also awaited clarity on an interim U.S.-China trade deal.
Palladium was up 0.3% at $1,845.80 an ounce, after hitting a new high of $1,861.71 earlier in the session. The metal has been breaking records daily since Nov. 25.
"Palladium positioning is slightly counter-intuitive to the price action, implicitly confirming heavy OTC interest from the long side," INTL FCStone analyst Rhona O'Connell said in a note. "After weak longs were shaken out in early November another push to the upside is now approaching resistance from the uptrend."
Concerns that supply of the metal used in car exhaust systems could run out has helped to lift prices by more than 47% this year alone, despite a weakening auto sector.
Silver shed 0.4% to $16.95 an ounce and platinum gained 0.4% to $903.51.