SINGAPORE – Gold prices jumped sharply in Asia yesterday as worry over the global economic outlook sent investors scuttling towards safe-haven bullion amid a sell-off in equities and the dollar.
Asian stocks had a shaky start to the week after a steep decline on Wall Street on Friday, while crude oil prices were stuck near four-year lows. Gold is often seen as an alternative investment to riskier assets such as equities.
Spot gold rose to a high of $1 234,80/oz before paring some gains to trade up 0,8% at $1 233,15 at 2:56am. United States gold futures jumped to $1 235,70, their highest since September 23.
Silver, platinum and palladium also gained. Gold’s first leg up on Monday came during early Asian hours when liquidity was thin. Japan, which is usually active early in the Asian day, was closed for a public holiday.
“A few stops were triggered this morning once we hit $1 225,” said a precious metals trader in Hong Kong.
“With the dollar and equities under pressure, and what is seen as dovish comments from Federal Reserve officials over the weekend, it looks like gold could see some more upside.
“We are expecting a move up to the $1 240 to $1 250 area, though we would be sellers there.”
Concern over the global economy has risen in the past few days after weak data from Europe and lowered global growth forecasts by the International Monetary Fund.
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Fed officials also expressed concern over the global economy, which could have an effect on the timing of an eventual rise in US interest rates.
Most notably, Fed vice-chairman Stanley Fischer said the effort to normalise US monetary policy after years of extraordinary stimulus could be hampered by the global outlook.
A delay in raising interest rates would be seen as positive for gold, a non-interest-bearing asset, and negative for the dollar. The greenback snapped a 12-week winning streak on Friday, and remained under pressure yesterday.
“Gold is going to be doubly influenced by both the equity markets and the dollar over the course of the week. We suspect that both will continue to drop over the short term, offering a measure of support to prices,” INTL FCStone analyst Edward Meir said.
“In addition, gold’s technical picture looks slightly more constructive,” he said.
Despite the recent gains, however, investor interest in the precious metal remains near multiyear lows.
– Reuters
