The US manufacturing sector contracted in September to its weakest level in more than a decade as business conditions deteriorated further amid trade tensions with China. "It shows there might be significant corrections in the economy and traders are going back into safety right now," said Phillip Streible, senior commodities strategist at RJO Futures.
"This weaker data might support another Fed rate cut and as a result, metals might get a bonus move higher," he said. However, bullion has lost nearly $100 since scaling a peak of $1,557 early September, largely due to the dollar's strength. Investors had been largely pricing in no further rate cuts going into a Fed meeting later in the month, on stronger economic data and reduced fears of a global recession. The Fed last cut interest rates in September for the second time this year.
While gold had been testing support below $1,500 due to a repricing of Fed rate cut expectations, "we think that risks remain skewed to the upside between now and year end," UBS analysts said in a note. Palladium fell 1% to $1,657.71 an ounce. On Monday, the auto-catalyst metal hit an all-time high of $1,700.71 on supply concerns. Silver gained 1.7% to $17.28 an ounce after touching its lowest since August 20 at $16.85, while platinum was down 0.3% at $879.72, having lost over 5% in the last session.