Gold edged higher on Monday, extending its recent rally on worries about global economic growth and hopes for easier monetary policy after weak factory data in Asia and Europe. China's official measure of manufacturing in January fell to the lowest since mid-2012 while factory growth across the euro zone slowed as incoming orders showed no meaningful increase.
"That China data was disappointing, very weak in both manufacturing and non-manufacturing, which coupled with the ongoing turmoil on global markets and uncertainties about growth going forwards have helped gold to get above the $1,115/20 resistance level," said Robin Bhar, head of metals research at Societe Generale in London. Spot gold added 0.6 percent to $1,124.37 an ounce by 1422 GMT. Bullion gained 5.4 percent last month, its largest rise since January 2015.
The spot price touched a 12-week high of $1,127.80 on Wednesday after the Fed said it was keeping a close eye on the global economy and financial markets and their impact on the US economy. US gold for April delivery rose 0.8 percent to $1,124.90 an ounce. "In the longer term, we still expect the dollar will go higher ... and we still have three (US interest rate) hikes in our scenario, but there is uncertainty around that ... and gold has benefited," ABN Amro analyst Georgette Boele said.
Weaker fourth-quarter US economic growth underpinned hopes that the Federal Reserve would slow the pace of future US rate increases, aiding gold by cutting the opportunity cost of holding it and keeping a lid on the dollar. Data on Monday showed US consumer spending was flat in December. "Gold has staged a January rally for three consecutive years," J.P. Morgan analyst Allan Cooke said in a note. "That has seen the metal breach its 200-day moving average trend line each time."
Gold's 200-day moving average, a key level used in technical analysis, is currently at $1,130 an ounce. Holdings of the largest gold-backed exchange-traded fund (ETF) - New York's SPDR Gold Trust - increased by about 4 percent in January, the most in a year. "There are a lot of bullish factors out there, but critical levels are approaching and that will be an acid test for the gold market," Bhar added.
Gold may run out of steam at key resistance of $1,130/35, where medium and long-term downtrend lines converge, he said. Hedge funds and money managers boosted their bullish bet in COMEX gold to a 12-week high in the week to January 26, US Commodity Futures Trading Commission data showed on Friday. Spot silver rose 0.4 percent to $14.32 an ounce, platinum was unchanged at $867 and palladium gained 0.9 percent to $502.25.