Gold price surges to highest level since June as share prices slide | Reuters - Firstpost
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Gold price surges to highest level since June as share prices slide | Reuters

Updated: Feb 9, 2016 00:15 IST

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LONDON The price of gold jumped more than 2 percent on Monday to touch its highest level since June, extending last week's sharp gains, as sliding stock markets and worries over global economic growth prompted investors to seek safety in hard assets.

Spot gold reached a peak of $1,198.70 an ounce, its strongest since June 22, after breaking key resistance at its October high at $1,190.63. By 1515 GMT it was up 2 percent at $1,196.9 an ounce.

"We are seeing non-stop buying from the investment community and little selling of note," one trader said, adding that exchange-traded funds and other investment funds were moving into gold as a safe haven.

U.S. share prices fell more than 1 percent and European stocks hit a 16-month low as weakening oil prices and concerns about a global economic slowdown unnerved investors.

Traders said gold's 5 percent gain last week, its biggest weekly rise since July 2013, had also made many investors more convinced that the metal's rally since the start of this year was sustainable.

Its next major resistance level would be $1,120 an ounce.

Gold has now risen more than 12 percent since the start of 2016, reversing last year's 10.4 percent loss.

"The main driver today is the slide in equity markets," said Societe Generale analyst Robin Bhar.

"There were headlines in the newspapers at the weekend about the risk of a global recession and there is general risk aversion sweeping through financial markets."

Some recent weak economic data, particularly from the United States and China, has led financial markets to expect there will be fewer U.S. rate hikes this year than the four they had been pricing in a few weeks ago, perhaps only one.

Lower rates cut the opportunity cost of holding gold, which earns no yield but costs to store and insure.

Hedge funds and money managers boosted their bullish bet in COMEX gold to a three-month high in the week to Feb. 2, U.S. Commodity Futures Trading Commission data showed on Friday.

Positive sentiment was also boosted by SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, which said its holdings rose 0.7 percent to 698.46 tonnes on Friday.

Gold, however, will be lacking support from Chinese physical buying in this Lunar New Year holiday week, analysts said.

U.S. gold for April delivery was up nearly 3 percent at $1,191.5 an ounce.

Other precious metals tracked gold higher. Platinum was up 1.5 percent at $921.33, after reaching $926.63, its highest since Nov. 9, while palladium was up 1.2 percent at $506.72 an ounce.

Silver jumped 2.4 percent to $15.33 an ounce, after briefly touching $15.43, its highest since Nov. 3.

(Editing by Susanna Twidale and Greg Mahlich)

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

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