Gold gains on softer dollar, safe-haven demand

Gold prices rose on Tuesday, buoyed by a pullback in the dollar and safe-haven buying due to economic slowdown concerns, though prospects of aggressive rate hikes capped further gains.

FUNDAMENTALS

* Spot gold rose 0.5% to $1,718.21 per ounce, as of 0120 GMT.

* U.S. gold futures gained 0.5% to $1,731.30.

* The dollar index inched down 0.2% after touching a 20-year peak in the previous session.

* The euro zone is almost certainly entering a recession, with surveys on Monday showing a deepening cost of living crisis and a gloomy outlook that is keeping consumers wary of spending.

* The European Central Bank faces the prospect of raising interest rates aggressively when it meets on Sept. 8 just as the economy enters a downturn.

* After Russia halted gas flows via a major pipeline to Europe, several EU states triggered emergency plans that could lead to energy rationing and fuelling recession fears, with inflation soaring and interest rates on the rise.

* However, further gains in gold were limited by expectations that the U.S. Federal Reserve could deliver another hefty interest rate hike in its fight against inflation during its Sept. 20-21 policy meet.

* Even though gold is seen as a hedge against inflation and economic uncertainties, higher interest rates increase the opportunity cost of holding the non-yielding bullion and boosts the dollar.

* Spot silver rose 0.9% to $18.32 per ounce, platinum was 0.7% higher at $851.50 and palladium gained 0.7% to $2,047.68.

DATA/EVENTS (GMT)

0430 Australia RBA Cash Rate Sept

0600 Germany Industrial Orders MM July

0600 Germany Manufacturing O/P Cur Price SA July

0600 Germany Consumer Goods SA July

0830 UK All-Sector PMI Aug

1345 US S&P Global Comp, Svcs Final PMIs Aug

1400 US ISM N-Mfg PMI Aug