The price of gold rallied Thursday, extending its winning streak to three days after another batch of soft data sparked a fresh wave of haven buying in the market.
Gold Extends Rally
December gold futures climbed all the way to a session high of $1,525.80 a troy ounce on the Comex division of the New York Mercantile Exchange. That would have marked the highest settlement since Sept. 24.
Bullion was last seen hovering at $1,513.00 a troy ounce, having gained $5.00, or 0.3%.
Silver futures were little changed, hovering at $17.68 a troy ounce.
Gold’s premium over the grey metal increased 0.3% to 85.65. That’s 85.65 ounces of silver for one ounce of yellow bullion.
U.S. Services Sector Weakens in September
The U.S. services sector, which accounts for the vast majority of gross domestic product (GDP), weakened significantly in September, the Institute for Supply Management (ISM) reported Thursday.
ISM’s non-manufacturing purchasing managers’ index (PMI) declined to 52.6 in September from 56.4 in August on a scale where 50 separates expansion from contraction.
Industry respondents blamed weak demand and uncertainty around tariffs for their dismal performance.
“Tariffs are adding uncertainty to short-term pricing on certain commodities, but suppliers are finding alternate solutions. The bigger impacts appear to be on demand side, which is driving short-term favorability in certain domestic markets,” said one respondent from accommodation and food services.
“Gearing up for the fourth quarter of 2019. On track to end the year generally as anticipated, considering interest-rate changes, trade and tariff issues and other economic indicators and trends,” said another from finance and insurance.
Earlier this week, ISM reported that U.S. manufacturing output contracted for a second straight month in September. Taken together, the two reports suggest the U.S. economy barely grew at the end of the third quarter.
Central Banking Will Drive Demand for Gold
The gold rally still has another 30% left in the tank heading into 2020, according to David Roche, president of Independent Strategy.
In an interview with CNBC, Roche said gold could crack $2,000 a troy ounce next year as investors look for alternatives to fiat currency.
“What my gut says is that cause of the vilification of fiat currencies by central bankers, which is set to get worse — not better, people will look for an alternative currency,” Roche told CNBC Thursday.
More than a decade after the financial crisis, central banks all over the world are easing monetary policy again. The Federal Reserve, European Central Bank, Reserve Bank of New Zealand and Reserve Bank of Australia have all re-introduced stimulus in recent months. The trend is expected to continue as global economies struggle with major economic headwinds, including the after-effects of a prolonged U.S.-China trade war.