Investing.com - Gold traded largely steady in early Asia on Tuesday with recent gains on easy monetary policies globally locked in and the market looking for further direction.
On the Comex division of the New York Mercantile Exchange, gold for April delivery traded in a narrow range and was last quoted at $1,128.60 a troy ounce, flat.
Silver for March delivery traded at $14.350 a troy ounce and copper for March delivery fell 0.07% to 2.059 a pound.
Overnight, gold surged on Monday to fresh three-month highs, as investors digested weak manufacturing data in China and the U.S. bolstering dovish sentiments for a delayed interest rate hike from the Federal Reserve.
In overnight trading, China announced that factory activity in January tumbled to a three-year low, exacerbating fears of slowing growth in the world's second-largest economy. Last month, China's Purchasing Manager's Index (PMI) fell by 0.3 to 49.4, dropping to its lowest level since 2012 and its sixth consecutive month in contraction. Meanwhile, a private survey from Caixin, which monitors smaller firms in China, inched up 0.2 from December to 48.4. Any reading under 50 provides indications of contraction in the manufacturing sector.
China is the world's largest producer of gold and the world's second-largest consumer of the precious metal behind India.
Separately, the Institute for Supply Management said Monday that its manufacturing composite index inched up 0.2 from a downwardly revised 48.0 to 48.2, slightly below consensus forecasts for a 48.3 reading. It marked the fourth consecutive month of contractions, extending one of the most disappointing stretches since the Great Recession. Within the report, backlog orders continued to lag, coming in at 43.0, amid weak demand for exports.
While personal income jumped by 0.3% in December, extending gains from the previous month, consumers for the most part held on to the increased earnings. At the same time, consumer spending remained unchanged for the month, following a surge of 0.5% in November. The U.S. Department of Commerce also said on Monday that its Core Price Consumption Expenditures (PCE) index gained 1.4% on an annual basis, up from 1.3% a month earlier. The Core PCE index, which strips out volatile food and energy prices, is the Federal Reserve's preferred gauge on inflation.
Last week, the Federal Reserve cited a weak inflation outlook as a main factor in holding its benchmark Federal Funds Rate steady at a target range between 0.25 and 0.50%. It came amid soft GDP figures for the fourth quarter, when the U.S. economy only grew by 0.7% for the final three months of 2015. A model from the Federal Reserve Bank of Atlanta, released on Monday, forecasts seasonally adjusted GDP growth of 1.2% for the first quarter, as well as upwardly revised estimates of 1.0% for last year's final quarter.
Investors also continued to react to Friday's unexpected move from the Bank of Japan to lower interest rates into negative territory in an unprecedented action from the Japanese central bank. With the surprising decision, two of the three largest central banks in the world are now offering negative interest rates for the first time on record. The easing measures are expected to help strengthen the dollar, while implicitly tightening the monetary policy cycle for the Fed even if it continues to leaves rates unchanged.
Before last week's interest rate decision from the Fed, the U.S. central bank was expected to raise short-term interest rates as much as four times this year, as it embarks on its first tightening cycle in nearly a decade. Any rate hikes in 2016 are generally viewed as bearish for gold, which struggles to compete with high-yield bearing assets in rising rate environments.