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Global Volatility Send Traders Running For Gold

By:
Barry Norman
Updated: Feb 9, 2016, 05:28 UTC

With China out on holiday, traders expected market volatility to be at a minimum, but no such luck. Traders went running for the hills after oil fell

Global Volatility Send Traders Running For Gold

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With China out on holiday, traders expected market volatility to be at a minimum, but no such luck. Traders went running for the hills after oil fell below the $30 price level. Gold and the yen soared as traders moved to a risk off mode. Gold surged to a high just above the $1200 price. In the Asian session traders sold off a bit of gold to book profits as it eased $4.70 to trade at 1193.20. Gold rallied for an eighth straight day after topping $1,200 an ounce for the first time since June as increased concern about the state of the global economy hurt equity markets and boosted demand for a haven. Producers’ shares rallied.

Gold has added 12% this year on rising concern the global economy is losing steam, with equity markets in retreat and investors cutting bets on higher US interest rates. Stocks in Asia fell on Tuesday following a drop in US and European stocks on Monday as Deutsche Bank AG became the largest lender in at least four years to feel compelled to reassure investors that it has enough cash to pay its debts.

“Escalating and a more-widespread global financial uncertainty, sparked by heightened investors’ risk-off sentiment, has sustained the sell-offs of major stocks,” Vyanne Lai, an economist at National Australia Bank Ltd. in Melbourne, said by e-mail on Tuesday. That’s driving stronger demand for safe-haven assets including gold, she said.

An index of Australian-listed producers rose as much as 7.9% to the highest since May 2013. Newcrest Mining Ltd. jumped as much as 8.4% in Sydney, and shares in Australia’s biggest producer are 28% higher in 2016. Perth-based Northern Star Resources Ltd. rose 8.6% on Tuesday.

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Deutsche Bank, Germany’s biggest lender, said on Monday that it has more-than-sufficient means to pay coupons on its riskiest debt this year and in 2017 as its shares sank. Among other jitters, US natural gas driller Chesapeake Energy Corp. plunged on concern that its financial options are narrowing.

The worldwide slowdown, including the deceleration in China, has increased speculation that US growth will cool enough to force Federal Reserve policy makers to wait longer before raising rates again. The prospect of delays has sent the dollar lower and given gold a boost as an alternative investment after three years of losses.

Gold in exchange-traded products have climbed for 15 consecutive days, the longest run since September 2012, according to data compiled by Bloomberg. The assets expanded 2.6% to 1,555.4 metric tons last week for the biggest weekly increase since May 2010. Underlining gold’s rising draw, holdings in eight major gold exchange-traded funds (ETFs) rose to 43.3 million ounces on Friday, the highest since July 2015.

More significant was the rapid pace of inflows since the start of the year, having risen more than 8 percent and the biggest five-week surge since March 2011.

Bullion gained 5 percent last week, its biggest such increase since July 2013, boosting gold bulls’ expectations that the price can go higher as global headwinds could make it tough for the U.S. Federal Reserve to raise interest rates this year.

In other metals silver gave back 61 points to trade at 15.365 after touching its highest level in several months. Platinum saw little activity in the Asian session to trade at 926.35.

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