Investing.com -- Gold prices surged to their highest in a week on Thursday after a weaker-than-expected survey of the U.S. non-manufacturing sector further boosted expectations that the Federal Reserve will cut interest rates again to support the economy.
Gold futures for delivery on the Comex exchange rose to $1,517.35 a troy ounce after the news, up 0.6% on the day, while spot gold rose 0.8% to $1,511.16 an ounce.
The Institute of Supply Management's purchasing manager index for non-manufacturing fell to a three-year low of 51.6, well below a consensus forecast of 55.0. Following on from a 10-year low for the ISM's manufacturing PMI earlier in the week, the indices are a clear indication of slowing activity in the U.S.
It also came on the heels of lower-than-expected readings for comparable indices in Europe, where the composite PMI calculated by IHS Markit for the euro zone fell to 50.1, suggesting that growth in the single currency area has all but ground to a halt. The U.K.'s composite PMI fell below the 50 line that divides growth from contraction.
Risk-off sentiment was further fostered in Europe by the EU's negative reaction to U.K. Prime Minister Boris Johnson's plans to tweak the withdrawal agreement negotiated by his predecessor. Irish Foreign Minister Simon Coveney was quoted as saying that the proposals "can not form the basis of a deal", while EU Brexit negotiator Michel Barnier reportedly also gave a negative opinion to ambassadors from the remaining 27 member states.
The safe-haven bid more than offset overnight news fleshing out the slowdown in physical demand from jewellers in the world's two biggest importers, China and India.
Bloomberg reported that India's gold imports plunged to only 13.5 tons, their lowest in three years, in September, in response to high prices and a more than usually disruptive monsoon season. Shipments were down 86% from a year earlier. With central bank buying also tailing off in recent weeks, that leaves portfolio interest as much the biggest prop for demand.
Other havens were also well-bid in the wake of the data: Silver futures rose 0.2% to $17.72 an ounce, while Platinum rose above $900 an ounce again, hitting $901.60, a gain of 0.6%.
The yield on the two-year U.S. government note fell another 9 basis points to 1.39%, its lowest in over two years, as investors added to their bets on another Fed rate cut. According to Investing.com's Fed Rate Monitor Tool, the chance of another interest rate cut at this month's policy meeting has now risen to over 90% from only 53% a week earlier.