Gold climbs towards three-month peak as equity nosedive sparks safe-haven rush

Bengaluru — Gold prices rose on Thursday towards a more than three-month high hit earlier this week, as a sell-off in global equities triggered safe-haven bids for the metal amid rising political and economic uncertainties.

Asian shares dived as hundreds of billions of dollars haemorrhaged from global markets after a rout in tech stocks inflicted the largest daily decline on Wall Street since 2011, wiping out all its gains for the year.

Spot gold was up 0.3% at $1,237.04 an ounce as of 3.57am GMT, not far off Tuesday’s $1,239.68, the highest since July 17.

US gold futures were up 0.7% at $1,239.70 an ounce.

“After the massive sell-off in global equities, investors are looking for a safe-haven shelter. They are starting to diversify and look at bullion as a means of value maintenance, with no end in sight appearing for the bear market,” said Benjamin Lu, a commodities analyst with Phillip Futures.

“We see more upside potential for gold prices, and if it continues to move up and reaches the $1,245 level, it could trigger a series of short covers, pushing prices to $1,255.”

Dollar-denominated gold is used as an alternative investment during times of political and financial uncertainty.

Gold prices have gained more than 6% after falling in mid-August to their lowest since January 2017 at $1,159.96 an ounce.

Concerns ranging from US-China trade disputes to Italy’s budget woes and Brexit uncertainty have accelerated the flight to safety, said Lukman Otunuga, a research analyst with FXTM.

“The growing uncertainty created from US-Saudi tensions and Italy’s budget woes can already be reflected across financial markets with investors avoiding riskier assets. The risk-off environment should offer gold an opportunity to shine brightly,” he said.

Spot gold may break a resistance at $1,238 an ounce, and edge up into a range of $1,252-$1,263, according to Reuters technical analyst Wang Tao.

Holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, rose 0.24% to 24,101,732.54 ounces on Wednesday, the highest since early September.

“The losses in global equity markets continue to provide support to the precious metals sector, with gold-backed ETFs recording strong inflows,” ANZ analysts said in a research note.

Meanwhile, the dollar index, which measures the greenback against a basket of six major currencies, was down 0.2%.

Among other precious metals, palladium was down 0.2% at $1,122.40 an ounce, drifting away from a record high of $1,150.50 an ounce marked on Tuesday.

Silver rose 0.7 percent to $14.74 an ounce, while platinum was up 0.5% at $831.60 an ounce. 

Reuters