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Gold Soars Above $1,200 as Turmoil Boosts Haven Demand

Gold Soars Above $1,200 as Turmoil Boosts Haven Demand

Thursday, 11 February 2016 01:32 PM

Gold climbed to the highest in a year, nearing bull-market territory, as investors sought a haven from tumbling stock markets after Federal Reserve Chair Janet Yellen suggested the central bank may delay raising interest rates. Producer shares rallied.

U.S. equities slumped as investors shunned risk worldwide amid concern that central-bank efforts to support economic growth are losing potency. Yellen yesterday told Congress that market turbulence may weigh on the outlook for the economy if it persists. The metal jumped as much as 5.8 percent to $1,263.90 an ounce, the highest since February 2015, and the gain was the biggest intraday advance since 2009.

Bullion has climbed 19 percent this year, making it the best-performing commodity. The outlook for U.S. interest rates to stay low has boosted gold’s appeal because it doesn’t pay interest like some other assets. Investors are piling into funds backed my the metal at the fastest pace in seven years. Shares of Barrick Gold Corp., the world’s largest producer of the metal, jumped to the highest since September 2014 in Toronto.

“At this particular moment you’ve got a lot of people who are jittery in the market who are rebalancing into gold for longer-term positions,” Frank McGhee, the head dealer at Alliance Financial LLC in Chicago, said in a telephone interview. “There was the impetus of safe-haven buying, and that pushed into people who have been on the short side of the gold market for a number of years.”

Gold futures for April delivery climbed 5.2 percent to $1,257.20 an ounce at 11:41 a.m. on the Comex in New York. Trading volume on the Comex in New York was more than double the 100-day average for the time of day. A close at $1,259.52 would signal a 20 percent gain from a recent low and meet the common definition of a bull market.

Gold Demand

Stock volatility and growth concerns will boost the appeal of bullion as a store of value and consumers in China and India may buy more, according to P.R. Somasundaram, the managing director for India at the World Gold Council. The group today said fourth-quarter global demand was the highest in more than two years.

Futures traders, who at the start of this year predicted a more than 50 percent chance of a U.S. rate increase in March, now peg the odds of a move by December at just 5.4 percent. Goldman Sachs Group Inc. said this week in a report before Yellen’s remarks that the bank still saw bullion dropping to $1,000 as the Fed hikes three times in 2016.

“It seems as though people are flooding to safe-haven assets,” Wayne Gordon, executive director for commodities and forex at UBS Wealth Management, said in a Bloomberg TV interview in Singapore on Thursday. “We still think we could have two rate hikes at the end of the year.”
  • Holdings in gold-backed exchange-traded products rose 8.2 metric tons to 1,571.3 tons as of Wednesday, the highest since July, data compiled by Bloomberg show. They’re up 7.5 percent in 2016, the best start to a year since 2009.
  • The Philadelphia Stock Exchange Gold and Silver Index jumped 7.1 percent, headed for the biggest gain in a week.
  • Silver futures for March delivery climbed 4 percent to $15.895 an ounce on the Comex. On the New York Mercantile Exchange, platinum and palladium also climbed.

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Gold surged the most in a year as investors sought a haven from tumbling stock markets amid expectations that the Federal Reserve will delay raising interest rates.The metal jumped as much as 2.7 percent to an eight-month high in London. The rout in European equities...
gold, metal, yellen, rates
Thursday, 11 February 2016 01:32 PM
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