On Monday, gold rose by 1%, reaching its highest in over seven years, as gloomy U.S. data pointed out how much the COVID-19 pandemic has damaged the world economy, while palladium rose by over 9% on a better-than-expected demand.
An employee takes granules of 99.99% pure gold at the non-ferrous metals plant in Krastsvetmet, one of the world's largest producers of precious metals, in the Siberian city of Krasnoyarsk, Russia, on 22 November 2018. REUTERS/Ilya Naymushin/Files
Spot gold rose 1% to $1,759.13 per ounce of 0708 GMT, after peaking at $1,764.46 on October 12, 2012. US gold futures gained 0.9% to $1,772.70.
"Markets are evaluating prices as the (economic) recovery will be a little slower than previously expected, and this will probably require a lower rate environment," said IG Markets analyst Kyle Rodda, adding that Friday's "really poor" US economic data was the big catalyst.
Friday's data showed that U.S. retail sales and industrial production collapsed in April, putting the economy on track for its deepest contraction since the Great Depression.
Federal Reserve Chairman Jerome Powell said the U.S. economic recovery could last until next year and a full return could depend on a coronavirus vaccine.
The Bank of England is also looking more urgently at options such as negative interest rates while the economy slides into a deep coronavirus collapse, according to its chief economist.
Gold is considered an interesting investment in times of political or economic turbulence. Lower interest rates also reduce the opportunity cost of holding non-deformable bars.
Adding to the sad economic scenario was renewed Sino-US friction, with the Chinese Ministry of Commerce saying last Sunday that it is firmly against the latest US rules against Huawei and that it will take all necessary measures to safeguard the rights and interests of Chinese companies.
"There is greater volatility, as the rhetoric is getting very hot, and especially from the United States. This is showing some weakness in growth-sensitive markets, and particularly in markets sensitive to China," Rodda said.
Reflecting investor sentiment, the holdings of SPDR Gold Trust, the world's largest gold-listed fund, rose 0.8% to 1,113.78 tonnes on Friday.
Among other precious metals, palladium rose 3.3% to $1,964.54 an ounce, after exceeding 9% in the previous session.
"Both palladium and platinum are growing strongly after the World Platinum Investment Council (WPIC) provided its updated metals forecast," said Edward Moya, a senior market analyst at OANDA broker.
"The WPIC showed that the prospects for both metals are better than expected, and that the impact of COVID-19 could be less (than expected)," he said, adding that the market was moving with optimism with respect to the demand for autocatalysts in China and America.
Platinum gained 1.1% to $806.55, while silver rose 3.7% to $17.23.
In relation to Harshith Aranya and K. Sathya Narayanan in Bengaluru; Editing by Subhranshu Sahu and Louise Heavens.