Gold jumps as traders favour safe-haven assets

Bengaluru — Gold prices jumped 1% on Monday as an attack on Saudi Arabia’s oil facilities dented risk appetite, boosting demand for the safe-haven bullion, while investors awaited clues on monetary easing from major central bank meetings due this week.

Spot gold was up 1% at $1,503.52 per ounce, as of 6.10am SA time. Prices had dipped 1.2% in the previous week on hopes that an end to the US-China trade tiff could be near.

US gold futures rose 0.8% to $1,511.20 per ounce.

The attacks on Saudi oil installations have lead to a rotation of interests out of stocks and into safe-havens, Oanda analyst Jeffrey Halley said.

With escalating tensions in the Middle East and hopes of more stimulus measures from major central banks, the next target for gold will be $1,530, he added.

Yemen’s Iran-backed Houthi rebel group claimed responsibility for the attack at the weekend on the world’s biggest oil-processing facility, but a senior US official said that evidence indicated Tehran was behind it.

President Donald Trump said the US was “locked and loaded” for a potential response to the attack, souring its already strained relations with Iran.

The event hurt risk sentiment in the markets, with Asian equities trading lower at 515.4, and the safe-haven yen up 0.4% to 107.64 per dollar. Against a basket of currencies, the dollar was 0.2% lower at 98.053.

Investors also await the outcome of the US Federal Reserve and Bank of Japan’s policy meetings on Wednesday, for signals on their future policy path.

“Accommodative monetary policy by global central banks will support bullion’s appeal for [the second half of] 2019,” Phillip Futures analyst Benjamin Lu said in a note.

Central banks globally are facing increasing pressure to dole out monetary support for flagging economies as the US-China trade dispute hurt trade and business sentiment. Lower interest rates reduce the opportunity cost of holding non-yielding bullion and weigh on the dollar.

Weighing further on risk sentiment was dismal data from China that showed factory and consumer sectors slowed further in August, with industrial production growing at the weakest pace in 17½ years, a sign of increasing weakness in an economy lashed by trade headwinds and soft domestic demand.

Spot gold could retest resistance at $1,524 per ounce, as it has temporarily bottomed around a support at $1,480, Reuters technical analyst Wang Tao said.

Among other precious metals, silver jumped as much as 3% to $18 an ounce and platinum was up 0.6% to $953.78. Palladium rose 0.4% to $1,612.50 per ounce.

Reuters