Gold rose to a 1-1/2 month high early on Monday, after gloomy Japanese economic data prompted safe-haven buying by investors worried about the global economy. Silver and platinum group metals, whose prices usually reflect economic sentiment because of their industrial uses, rose with gold.
A sharp drop by the dollar also boosted gold, which resumed its usual inverse correlation with the dollar. Growth in Japan's economy slowed to a crawl with an anaemic 0.1 percent rise in the second quarter, and analysts see weakness ahead. "You can consider this to be safe-haven buying. It is also supported by the overall low interest-rate environment that makes gold additionally attractive to investors," said Alexander Zumpfe of Heraeus Metals.
Spot gold rose to $1,222.95 an ounce by 1:00 pm EDT (1700 GMT) from $1,214.50 late in New York on Friday. It hit an intraday day high of $1,227.15 - its highest since July 1. Bullion struck a record high around $1,264 in June. US gold futures for December delivery rose $9.00 to $1,225.40 an ounce.
Gold managed to hold firm above $1,200 an ounce after the Federal Reserve's downgrade of its economic outlook last week, sending Wall Street down more than 3 percent. Gold, which had traded in a broad range for two months, has been in rally mode after a 1.5 percent rise last Thursday, its biggest one-day gain in more than two months. "There are jitters about the global economic recovery, but also the fact that we're trading comfortably above $1,200 is prompting some interest in the gold market," said Eugen Weinberg, an analyst at Commerzbank.
The 25-day simple correlation between gold and dollar was a plus 0.2 on Monday, sharply lower than a high of over plus 0.8 earlier in August. In other metals, silver rose in line with gold, trading at $18.40 an ounce from $18.08 late on Friday in New York. Platinum firmed to $1,529.00 an ounce from $1,520 an ounce and palladium to $481.65 an ounce from $472.