Gold gained more on Tuesday as the dollar eased in the wake of disappointing US economic data that raised doubts over a Federal Reserve rate rise this year. Spot gold rose 1.2 percent to a ten-day high of $1,149.70 an ounce and was up 0.9 percent at $1,147.03 an ounce by 1418 GMT.
The gains added to Friday's 2.2 percent jump, the biggest one-day rise since January 15, which followed data showing US employers had slammed the brakes on hiring over the last two months. After Friday's soft jobs report, data on Monday showed the pace of growth in the US services sector decelerated in September as new orders and business activity slowed. However, some analysts said a US rate hike in December could not be ruled out entirely.
"The Fed is worried about the implications of continuing low inflation or even outright deflation because of low oil prices, but a December rate hike is still possible," Mitsubishi Corp strategist Jonathan Butler said. "And assuming that we see a rate lift-off in December, the short-term outlook for gold is not bullish." Analysts also cited increasing international political tensions after Russia's warplanes violated the air space of alliance member Turkey at the weekend.
"Increasing tensions between Russia and Turkey are helping gold today... that should continue in the short term, but then the focus will be shifting back to what the Fed is going to do and the dollar," Commerzbank analyst Daniel Briesemann said. The dollar was down 0.3 percent against a basket of currencies and global shares rose. Markets believe signs of sluggishness in the US economy, along with weakness in China and volatility in financial markets, could prompt the Fed to hold rates.
Higher rates would increase the opportunity cost of holding gold. The non-interest-paying asset, which has benefited from years of ultra-low US rates, has fallen nearly 4 percent this year on expectations that the Fed will move to increase rates for the first time in nearly a decade. SPDR Gold Trust, the top gold-backed exchange-traded fund, saw a small outflow of 0.22 tonnes on Monday. That is the fund's first outflow in two weeks. Silver rose to a fresh three-month high of $16.02 an ounce. It has gained nearly 8 percent in the last two sessions. Platinum rose 2.5 percent to $935.99 an ounce, having hit a near seven-year low of $888 on Friday. Palladium reached its highest since June at $711. The metal is benefiting from expectations that demand for gasoline cars, where the metal is used in catalysts, would rise due to the Volkswagen diesel engine emissions scandal.