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Gold prices jumped sharply in Asia on Monday as worries over global economic outlook sent investors scuttling towards safe-haven bullion amid a sell-off in equities and the dollar.
Asian stocks had a shaky start to the week after a steep decline on Wall Street on Friday, while crude oil prices were stuck near four-year lows.
Spot gold, gold futures
Gold is often seen as an alternative investment to riskier assets such as equities. Spot gold rose to a high of $1,234.80 an ounce before paring some gains to trade up 0.8 per cent at $1,233.15 at 0256 GMT.
US gold futures jumped to $1,235.70, their highest since September 23. Silver, platinum and palladium also gained. Gold’s first leg up on Monday came during early Asian hours when liquidity was thin. Japan, which is usually active early in the Asian day, was closed for a public holiday.
“A few stops were triggered this morning once we hit $1,225,’’ said a precious metals trader in Hong Kong.
“With the dollar and equities under pressure, and what is seen as dovish comments from Federal Reserve officials over the week-end, it looks like gold could see some more upside.’’
“We are expecting a move up to the $1,240-50 area, though we would be sellers there.’’
Global growth concerns
Concerns over the global economy have risen in the past few days after weak data from Europe and lowered global growth forecasts by the International Monetary Fund.
Fed officials also expressed concern over the global economy, which could have an impact on the timing of an eventual rise in US interest rates.
Most notably, Fed Vice-Chairman Stanley Fischer said the effort to normalise US monetary policy after years of extraordinary stimulus may be hampered by the global outlook.
A delay in raising interest rates would be seen as positive for gold, a non-interest-bearing asset, and negative for the dollar. The greenback snapped a 12-week winning streak on Friday, and remained under pressure on Monday.
“Gold is going to be doubly influenced by both the equity markets and the dollar over the course of the week. We suspect that both will continue to drop over the short-term, offering a measure of support to prices,’’ said INTL FCStone analyst Edward Meir.
“In addition, gold’s technical picture looks slightly more constructive,’’ he said.
Despite the recent gains, however, investor interest in the precious metal remains near multi-year lows. Holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund and a good proxy for market sentiment, fell 2.64 tonnes on Friday to 759.44 tonnes, its lowest level since December 2008.
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