Gold rose on Tuesday as a wave of risk aversion due to growth worries in China and rising tensions in the Middle East triggered demand for the metal. Spot gold was up 0.3% at $1,077.60 an ounce by 12.58pm. On Monday, the metal jumped as much as 2.2% to a four-week high of $1,083.30 after data showed Chinese factory activity contracted for a 10th straight month in December. Gold futures nudged higher for a second day Tuesday morning, as traders expressed anxiety over the outlook for the global economy in 2016. With investors looking for a safe haven amid geopolitical tensions and falling stocks, US gold for February was up 4 dollars at $1079 an ounce, having touched $1082 a few hours ago. Traders will instead be watching developments in the Middle East, where tensions between Iran and Saudi Arabia risk escalating to a wider conflict. "More weakness in China ... would be more positive for gold but investors would need to see more evidence of systemic issues there, which is still unlikely," Julius Baer analyst Carsten Menke said. "That could be the only longer lasting upside for gold in an otherwise bearish outlook due to sound growth in the US and lack of inflation risks." A 7% slide in Chinese shares on Monday, sparked by weak economic data, rekindled worries over global growth on the first day of trading in 2016 and sent European and US stocks diving. China stocks closed mixed on Tuesday in volatile trade, with indexes swinging into and out of negative territory, while European indices rebounded. "The first important resistance zone (for gold) lies between $1,083 and $1,087, with the next major level at $1,100," said MKS Group in a note. Bullion, often seen as an alternative investment in times of political and financial uncertainty, is also benefiting from a shift away from risk along with the Japanese yen and US bonds. Safe-haven rallies tend to be short-lived and gold could see the focus shift back to US monetary policy soon. Gold slid 10% last year on fears that higher US rates would lower demand for the non-interest-paying asset, while boosting the dollar. A stronger greenback makes dollar-denominated gold costlier for holders of other currencies. San Francisco Federal Reserve president John Williams said on Monday he is unfazed by the weak economic data out of China that has spooked Wall Street, and sees three to five US interest rate hikes this year as reasonable, given the strength of the US economy. Investor sentiment remains bearish. Hedge funds and money managers boosted their net short position in COMEX gold to a fresh record in the week to December 29, US government data showed on Monday. Silver rose 0.6% to $13.95 an ounce, having ended 2015 down 11.7%. Industrial metal platinum was up 0.4% to $887.10 an ounce and palladium gained 0.5% to $541.72.
