Gold hits seven-week high as worries over China hurt stocks | Reuters - Firstpost
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Gold hits seven-week high as worries over China hurt stocks | Reuters

Updated: Jan 7, 2016 05:00 IST

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LONDON Gold hit a seven-week high on Wednesday, extending gains for a third session as persistent concerns over the Chinese economy battered stock markets, while tensions simmered in the Korean peninsula and the Middle East.

Spot gold was up 1.2 percent at $1,090.95 an ounce at 1500 GMT, off a peak of $1,093.10, its highest since Nov. 16. U.S. gold futures for February delivery were up $12.50 an ounce at $1,090.90.

The metal has broken through a key chart level at $1,088, which could indicate prices have bottomed for now after twice rebounding from the $1,045 area in December, analysts said.

"(The) geopolitical situation along with a cocktail of global market sell-offs is fuelling this move," Naeem Aslam, chief market analyst at Ava Trade, said.

World stocks fell for a fifth day as China fuelled fears about its economy by allowing the yuan to weaken further, and a nuclear test by North Korea added to a growing list of political worries.

North Korea said it successfully tested a miniaturised hydrogen nuclear device on Wednesday, setting off alarm bells in Japan and South Korea.

Relations between Saudi Arabia and Iran collapsed over the weekend after the kingdom's execution of a Shi'ite cleric, a prominent critic of Saudi policy, set off a storm of protests in Tehran.

"Some risk aversion prompting safe-haven flows has helped gold," Societe Generale analyst Robin Bhar said. "Physical demand has been pretty strong at the lower levels."

"As we go higher, we could see some of that physical demand beginning to slow. Now we need investors to jump back in and look to hedge some of the uncertainties over global growth, over China, with positioning in gold."

Traders will examine the minutes of the Federal Reserve's last meeting when they are released later on Wednesday for clues about the U.S. central bank's plans for interest rate hikes.

Gold fell 10 percent last year on fears higher U.S. rates would lift the opportunity cost of holding non-yielding bullion. The Fed raised rates for the first time in nearly a decade last month and is expected to hike rates further this year.

Silver was up 0.8 percent at $14.08 an ounce, while platinum was down 0.9 percent at $880.65 an ounce and palladium was down 3.3 percent at $516.72 an ounce.

Palladium prices fell to their lowest in nearly 5-1/2 years in earlier trade at $514.20 an ounce. The autocatalyst metal, as a largely industrial commodity, is more exposed than gold to economic weakness.

(Additional reporting by A. Ananthalakshmi in Singapore; Editing by Susan Thomas and Dale Hudson)

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

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