Gold hits nine-week high as China worries hit stocks | Reuters - Firstpost
Powered By:
In Association With:
You are here:

Gold hits nine-week high as China worries hit stocks | Reuters

Updated: Jan 8, 2016 02:15 IST

#Argentina   #Business   #China   #Entertainment   #Latin America   #markets   #science  

LONDON Gold climbed above $1,100 an ounce for the first time in nine weeks on Thursday as the dollar fell and investors channelled money into safer assets after worries about the Chinese economy hit global stocks.

European shares fell sharply after China accelerated the depreciation of the yuan and Asian shares hit a three-month low.

China's stock markets were suspended less than half an hour after opening on Thursday after sharp falls triggered a new circuit-breaking mechanism for a second time since its introduction this week.

Spot gold XAU= rose to a nine-week high of $1,102.80 an ounce, before paring some gains to trade 0.4 percent higher at $1,098.70 by 1249 GMT. U.S. gold futures also jumped for a fourth straight session to a nine-week high of $1,102.50.

"Gold's strength is probably going to be relatively short term, but there is an upside risk to gold, if the view that China is going to pull the whole world into recession becomes stronger," Citigroup metals strategist David Wilson said.

"But if the U.S. and Europe continue to grow, gold will go weaker ... Chinese stock markets had got massively over-inflated because a lot of money piled into it and now people have come back to reality."

Palladium XPD=, however, which is more exposed to economic weakness because it is used as an autocatalyst metal, slipped to $483.50 an ounce, its lowest since Aug. 25, 2010.

Bullion was also supported by a softer dollar and the release of the minutes of the Federal Reserve's last policy meet, assuring markets of only gradual rate increases this year.

Gold, often seen as an alternative investment during times of geopolitical and financial uncertainty, benefited from the risk-averse sentiment in the market along with other safe-haven assets such as the Japanese yen and U.S. Treasuries.

"Gold is clearly re-establishing its role as a safe-haven. For as long as global stock markets – in particular China's – appear wobbly, gold is likely to attract a good bid," HSBC analyst James Steel said.

A raft of data releases from China in coming weeks is likely to show activity continuing to slow, adding to global concerns about the country's economic outlook for 2016.

The World Bank on Wednesday cut its global economic growth forecast for 2016, citing the weak performance of major emerging market economies.

China added more gold to its reserves in December, bringing its total purchases in the second half of 2015 to more than 100 tonnes. More purchases by the world's sixth largest official sector gold holder could lend support to prices.

Among other precious metals, silver XAG= rose 0.2 percent to $14.03 an ounce and platinum XPT= dropped 1.2 percent to $864.90 an ounce.

(Additional reporting by A. Ananthalakshmi in Singapore; editing by Mark Potter and David Clarke)

This story has not been edited by Firstpost staff and is generated by auto-feed.

Comment using Disqus

Show Comments