Daily Gold Update

Source: Bill Musgrave, American Gold Exchange

Austin— Gold gained 0.4% to close near $1,108 after another round of soft economic data from China data damped expectations of a Fed rate hike this week, eroding risk appetite and boosting demand for safe havens.

Factory production and business investment in China were weaker than expected in August, providing further evidence of the deepest slowdown since the global financial crisis in 2009. Equity markets retreated on the downbeat data, with Dow and Global Dow losing 0.5% as investors eschewed risky assets in favor of U.S. Treasury bonds and gold.

The dollar inched up but held near three-week lows as traders wagered the Fed will hold off raising rates until December. The CME FedWatch tool, which monitors trading of Fed fund futures, places the odds of a December hike at 60% and September at just 25%.

In light of slower growth in China, higher market volatile, and rising deflationary pressure worldwide, a number of prominent economists have recently warned the Fed against raising rates this month. Former Treasury Secretary Lawrence Summers, a former candidate for Fed Chair, said it be a "catastrophic error"; Nobel laureate Joseph Stiglitz called it "a no-brainer" to postpone a rate hike; and World Bank Chief Economist Kaushik Basu told the Financial Times last week that raising rates in September would risk "panic and turmoil" in global markets.

Going a step further, Goldman Sachs Chief Economist Jan Hatzius said today that the Fed should embark on another round of quantitative easing instead of raising rates. Ray Dalio, founder of Bridewater Associates, the world's largest hedge fund, said the same thing last month.

The other precious finished lower, with silver and platinum both falling 1% while palladium dropped 0.5%.

At the Comex close: December gold gained $4.40 to $1,107.70; December silver lost 14 cents to $14.36; October platinum dropped $9.50 to $955.40; and December palladium slid $3.20 to $587.80 an ounce.