Gold price falls despite safe-haven status
London (Aug 24) Gold prices were lower on the London spot market on Monday, as steep falls in Chinese equities, and concerns about its economic growth, sparked a general sell-off in commodities across the board and dinted gold's recent good run.
The Shanghai Composite Index declined more than 8 per cent on Monday. As China accounts for almost a quarter of global gold demand, broad market negativity about China spread to the gold price, which had hit a six-week high last week as investors put money into safe havens.
Concerns about China have dogged metals' markets recently, following the devaluation of the yuan a fortnight ago and the release of a string of underwhelming economic data.
Spot gold was down 0.5 per cent at $US1,154.10 a troy ounce in morning European trade. The losses were less severe than those of other metals, as the yellow metal was propped up by safe haven buying. This status is expected by analysts to extend gold's relative performance. Gold is traditionally considered a safe asset in which to store money, as it maintains a stable level of value. As a result, demand for the metal tends to spike in times of social, political or economic uncertainty.
"Gold and other safe-havens, like the yen and US treasuries, are once again acting as safe-havens," William Adams, head of research at Fastmarkets, said in a note.
Recent buying had ended a long period of selling of gold, which had fallen to a five-year low as recently as late July.
Looking ahead, further gains are seen after the Jackson Hole Symposium this week.
"Given how pessimistic the global investment community is, chances are the markets will put increased focus on the bearishness of [Janet] Yellen in this symposium and use it as an excuse to buy gold," said Howie Lee, an investment analyst at Phillip Futures. "Gold seems to be heading for $US1,200 an ounce again."
Among the other precious metals, spot silver was down 2.4 per cent at $US14.938 an ounce, spot platinum was down 1.7 per cent at $US1,001.41 an ounce and spot palladium was down 1.9 per cent at $US589.65 an ounce.
Source: Business-Spectator
