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PRECIOUS-Gold hits 1-1/2-month peak on soft U.S. data, trade deal concerns

Sumita Layek

(Updates prices, adds comment and details)

* Trading volume low ahead of Christmas break

* Silver hits highest level since Nov. 7

* GRAPHIC-2019 asset returns: http://tmsnrt.rs/2jvdmXl

Dec 24 (Reuters) - Gold prices rose to their highest in a month and a half on Tuesday, as soft economic data out of the United States and concerns about an interim Sino-U.S. trade deal lent support to the safe-haven bullion.

GMT. Earlier in the day, prices hit their highest since Nov. 7

$1,492.80. Data on Monday showed new orders for key U.S.-made capital goods barely rose in November and shipments fell, suggesting business investment will probably remain a drag on economic growth in the fourth quarter. "The weaker U.S. economic data is starting to show up ... there are still concerns that the current level of tariffs will continue to weigh on the U.S. economy as we enter into 2020," said Stephen Innes, a market strategist at AxiTrader. Adding to concerns, Canada's economy unexpectedly shrank by 0.1% in October, the first monthly decline since February, partly because of a U.S. auto strike that hit manufacturing.

Gold is considered an alternative investment during times of political and financial uncertainty. On the trade front, investors awaited further developments on the 'phase one' deal between the world's top two economies. "We are still not 100% clear if the 'phase one' deal will go through or not, it has not been signed yet ... we then pivot to 'phase two' that suggests you need some gold, because we don't know what the next phase is all about, how contentious of a deal that is going to be," Innes added. Gold was on track for its best year since 2010 with a 16% gain, mainly due to the 17-month tariff dispute that has roiled the global financial markets. Even as Beijing and Washington have taken steps to defuse their dispute, they diverge on a slew of issues, including anti-government protests in Hong Kong and the treatment of Muslim Uighur minority. Asian shares and U.S. stock futures darted in and out of losses on Tuesday as the holiday lull offset optimism of a trade deal. Trading is expected to be subdued in many financial markets ahead of the Christmas holidays.

after scaling its highest since Nov. 7 at $17.57 earlier in the session.

(Reporting by Sumita Layek in Bengaluru; Editing by Subhranshu Sahu)