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Gold up Again on Dismal U.S. Data, Fed Cut Hopes

By Barani Krishnan - More dismal news for the U.S. economy is lending more support to gold longs. A key index measuring the services sector hit three-year lows on Thursday, triggering more risk exodus and flow into safe havens.

Futures and spot prices of gold advanced in the $1,500 territory. The gains, however, were more modest than the past two sessions when U.S. private payrolls growth showed bleak growth for August and a closely watched manufacturing measure hit 10-year lows. Still, growing fears of an economic slowdown led to speculation that the Federal Reserve will cut rates again this month, a positive development for gold.

U.S. gold futures for December delivery settled up $5.90, or 0.4%, at $1,513.80 per ounce on the Comex division of the New York Mercantile Exchange.

Spot gold, reflective of trades in bullion, was up $9.08, or 0.6%, at $1,508.99 by 2:13 PM ET (18:13 GMT).

Since hitting a two-month low of $1,465 in Tuesday’s intraday trade, Comex gold futures have gained more than $48, or 3.3%.

Gold extended its gains on Thursday after the Institute of Supply Management said its non-manufacturing index fell to its lowest level since August 2016.

On Tuesday, the ISM said its purchasing managers index for manufacturing posted the lowest reading since 2009.

That gloomy data was followed by Wednesday’s ADP) National Employment Report, showing private payrolls growth in August was not as strong as previously estimated, while September's number came in below forecasts.

Risk appetite across financial markets has diminished, while appeal for safe havens has grown with the weak macroeconomic numbers that came amid concerns that there might be little progress again at U.S.-China trade talks reopening on Oct. 10.

Gold was also benefiting from talk of another Fed rate cut at its Oct. 29-30 meeting. That would be the Fed's third rate cut for the year after back-to-back quarter-point cuts in July and September. The Fed has said its goal is to support the 10-year-old economic expansion, now the longest on record.'s Fed Rate Monitor Tool says there's an 87.7% chance of an October rate cut.

“For precious metals, the weak growth signal from the ISM has brought forth fears that the trade war may now be hitting home,” TD Securities said in a note. “In this context, money managers have once again taken to gold's warm embrace, while gold continues to benefit from CTA flow which is adding to selling pressure in equities.”

The gold market’s attention now will be on Friday’s all-important September U.S. jobs report, due at 8:30 AM ET (12:30 GMT) from the Labor Department.

“Tomorrow's jobs report will be key as a particularly weak print could to lock in the October cut and could also prompt a change in language about the prospect of future cuts,” TD Securities added.

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