Gold prices exceeded US$1,300 per ounce for the first time since August last year on speculation that slowing global growth will prompt central banks to boost stimulus, spurring haven demand.
Assets in exchange-traded products backed by the metal are heading for the first monthly gain since July last year. Open interest in New York futures and options is at the highest in eight weeks, and money managers have increased their net-bullish position to the largest since August last year.
After shunning gold for two years, investors are returning to the metal amid concern US growth will not be enough to offset weakness in foreign economies.
The IMF and the World Bank cut outlooks for global growth this month, even as they upgraded estimates for US expansion.
Policymakers in Europe and Asia are being challenged to come up with new ways to spur growth amid prolonged below-target inflation.
“Capital is flowing into safe assets such as gold,” said Mark To (涂國彬), head of research at Wing Fung Financial Group (永豐金融集團), a trader and refiner in Hong Kong. “The market is currently full of news that’s supportive of higher gold prices — expectations for lower global growth, uncertainty around what the ECB [European Central Bank] will do and more stimulus around the world,” he said.
Prices of bullion for immediate delivery climbed by as much as 0.6 percent to US$1,303.63 per ounce and traded at US$1,300.58 by 3:20pm in Singapore yesterday, according to Bloomberg generic pricing.
Prices jumped 4.7 percent last week, the most since 2013, as investors sought safety from turmoil in currency markets after the Swiss central bank unexpectedly abandoned the Swiss franc’s cap against the euro.
The precious metal has climbed 9.8 percent this year.
While diverging monetary policies have driven the Bloomberg Dollar Spot Index to a 10-year high, the slump in commodities and weakness in foreign economies have raised speculation the US Federal Reserve might hold off boosting rates. This raises gold’s appeal as a store of value, as it generally gives investors returns only through price gains.
The ECB is set to announce asset purchases today, further weakening the common currency that is already near an 11-year low, while the Bank of Japan yesterday cut its inflation forecast and maintained its stimulus.
Gold prices rose to 1,126.61 euros (US$1,303.52) per ounce, the highest since 2013.
Analysts are split on the outlook for gold this year. Goldman Sachs Group Inc and Societe Generale SA expect the metal to decline, with SocGen forecasting prices to reach US$1,000 by Dec. 31, it said in a report on Wednesday last week. Standard Chartered PLC expects gold to rally to US$1,320 by the fourth quarter, it said on Tuesday.
Gold prices fell 1.4 percent last year after a 28 percent loss in 2013, marking the first consecutive annual slide since 2000.
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