Gold price advances for second day as investors in ‘risk-off’ mode

January 5, 2016

Singapore (Jan 5)  Gold rose for a second day as a global equity rout, ignited by concerns over slowing economic growth, and tensions between Saudi Arabia and Iran prompted a return to haven assets.

Bullion for immediate delivery advanced as much as 0.2% to $1,077.13 an ounce and was at $1,076.65 at 12:26 p.m. in Singapore, according to Bloomberg generic pricing, after surging 2.1% the day before to $1,083.59, the highest price since Dec. 9.

Global equities had their worst start to a year in at least three decades after evidence of slowing manufacturing in China triggered a sell-off that halted trading in Shanghai on Monday. Saudi Arabia’s execution of 47 men at the weekend has spurred rising tensions with rival Iran. The two factors help gold, which is regarded as a store of value during market and geopolitical turmoil.

“The risk-off sort of shift in trading overnight and from yesterday has clearly supported buying in the gold market,” Daniel Hynes, senior commodities strategist at Australia & New Zealand Banking Group Ltd., said by phone from Sydney. “The weak equity markets that we saw firstly in China, and then North America, certainly amplified that risk-off trade today.”

ANZ’s Outlook

ANZ “would generally recommend selling into these little rallies, considering we see further weakness in gold prices over the next few months, particularly leading into the next couple of FOMC meetings,” said Hynes.

The Federal Open Market Committee is expected to gradually tighten US monetary policy over the year. Gold lost 10% in 2015 for a third annual decline after the Fed increased rates for the first time since 2006, boosting the dollar and damping appetite for the metal, which doesn’t pay interest.

Holdings in gold exchange-traded products fell to 1,463.4 tons on Monday, near the lowest in more than six years, according to data compiled by Bloomberg. The assets shrank 8.3% in 2015 in a third year of contraction.

Bullion of 99.99% purity rose as much as 1% to 227.10 yuan a gram ($1,083.42 an ounce) on the Shanghai Gold Exchange. Spot silver advanced 0.6% to $13.96 an ounce and platinum climbed 0.6%. Palladium rose 0.7% to $544.26 an ounce, after dropping on Monday to the lowest close since Dec. 3.

Source: MineWeb

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