Gold steady near six-month high on global economic worries, volatile stocks

Gold held steady in thin trade after scaling a six-month peak on Friday, supported by a softer dollar, worries over global economic growth and tumultuous stock markets, propelling bullion to the second week of gains.

Spot gold rose 0.2 percent to $1,277.23 per ounce as of 1025 GMT, and was up 1.7 percent so far this week. The precious metal hit its highest since June 19 at $1,282.09 earlier in the session.
U.S. gold futures were steady at $1,280.40 per ounce.

"Gold prices rose as market sentiment soured anew, weighing on bond yields and cooling U.S. Federal Reserve rate hike bets. That buoyed the appeal of non-interest-bearing bullion," said Ilya Spivak, a currency Strategist at DailyFx.

"From here, follow-through buying seems unlikely as traders withhold conviction ahead of the long weekend and New Year holiday liquidity drain."

The dollar index, a gauge of its value versus six major peers, edged lower, adding to gold`s appeal by making it cheaper for holders of other currencies. 

Financial markets are expecting U.S. growth to slow next year due to rising interest rates. A measure of U.S. consumer confidence posted its sharpest decline in more than three years in December, emphasising the possibility. 

A darkening outlook for global economic growth, a simmering trade war between the United States and China, as well as Brexit-linked uncertainty may trigger renewed risk aversion and help lift gold prices in 2019, Spivak said.

Gold is often used by investors as a hedge against political and financial uncertainty.

"We are seeing good amount of selling from the producers to take advantage of higher prices, which has stopped gold`s rally on the upside," said Afshin Nabavi, senior vice president at MKS SA.

"As long as the U.S. government continues to remain shut, it may invoke some safe-haven bids and help gold to touch new highs."

Both chambers of the U.S. Congress convened for only a few minutes late on Thursday, but took no steps to end a partial federal government shutdown before adjourning until next week.

Meanwhile, stocks in Europe and Asia rose cautiously after Wall Street ended a volatile session with big gains, but fears of further price swings and worries about U.S. politics kept safe-haven currencies such as the yen and Swiss franc in demand.

Among other precious metals, silver rose to a near five-month high at $15.364 per ounce and was last up 0.5 percent at $15.29. The metal was on track for its biggest weekly gains since August 2017, up 4.8 percent so far this week. 

Platinum was steady at $795.80 per ounce, while palladium dipped 1.1 percent to $1,265.17. Palladium has gained about 3 percent this week.