Gold futures rally amid signs of increased demand, silver up 3%

Gold futures rallied more than 1% on Monday, after data showed that holdings in SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, increased for the first time since June on Friday.

On the Comex division of the New York Mercantile Exchange, gold futures for December delivery traded at USD1,330.70 a troy ounce during European morning hours, up 1.4%.

Gold prices hit a session high of USD1,332.90 a troy ounce earlier, the strongest level since July 31.

The December contract settled up 0.2% at USD1,312.20 a troy ounce on Friday.

Gold futures were likely to find support at USD1,282.80 a troy ounce, the low from August 8 short-term resistance at USD1,339.15, the high from July 31.

Data from the SPDR Gold Trust Fund showed assets in the world’s largest gold ETF on Friday increased 1.8 metric tons to 911.13 metric tons, marking the first increase since June 10.

Gold traders were looking ahead to Tuesday’s retail sales report, as well as speeches by senior Federal Reserve officials later in the week amid ongoing speculation over how soon the Fed may start to pull back its asset purchase program.

Investors have closely been looking out for U.S. data reports recently to gauge if they will strengthen or weaken the case for the Fed to reduce its bond purchases.

Any improvement in the U.S. economy was likely to reinforce the view that the central bank will begin to taper its bond purchase program in the coming months.

The precious metal is on track to post a loss of approximately 21% on the year amid concerns the Fed will start to unwind its stimulus program by the year's end.

Moves in the gold price this year have largely tracked shifting expectations as to whether the U.S. central bank would end its quantitative easing program sooner-than-expected.

An exit from the stimulus would deal a heavy blow to gold, which has thrived on demand from investors who buy gold to hedge against the inflationary risks of loose monetary policies. 

Elsewhere on the Comex, silver for September delivery surged 3.3% to trade at USD21.07 a troy ounce, the strongest level since June 20.

Meanwhile, copper for September delivery added 0.3% to trade at USD3.317 a pound, the highest since June 7.

Appetite for the red metal improved after data on Friday eased concerns over a slowdown in China’s economy.

Official data showed that Chinese industrial output rose significantly more-than-forecast in July and consumer price inflation remained unchanged, alleviating fears over a slowdown in the world’s second-largest economy.  

Market sentiment received a further boost after Hong Kong daily newspaper South China Morning Post reported earlier that Beijing was “quietly offering financial stimulus” to key cities and provinces to support economic growth.

China is the world’s largest copper consumer, accounting for almost 40% of world consumption last year.