Gold climbs to near 3-week high as equities dip
Singapore, January 6, 2014
Gold rallied for a fifth day to its highest level in nearly three weeks on Monday, as softer equity markets prompted investors to tap the asset's safe-haven qualities.
The metal's rally comes despite a stronger dollar and bullish comments from the Federal Reserve on the US economy, but follows a near 30 percent loss last year.
The upswing in prices failed to dent physical purchases in China, the world's biggest bullion consumer, where demand has picked up ahead of the Lunar New Year and trading volumes on the Shanghai Gold Exchange hit an eight-month high on Monday.
"Weaker equities will have more of an impact on gold prices than a stronger dollar," said Helen Lau, an analyst at UOB-Kay Hian Securities in Hong Kong.
"It is all about allocation by funds. If there is an increase in allocation towards gold and less towards stocks, there will be a decrease in outflows from gold exchange-traded funds (ETFs) and that is a positive for prices," she said.
Lau expects gold to average $1,200 for the year, and says it is likely hit $1,300 in the first quarter.
Spot gold rose 0.4 percent to $1,240.90 an ounce by 0739 GMT. It earlier hit a near three-week peak of $1,245.86.
The metal lost nearly 30 percent of its value last year as global stocks jumped and as the Fed announced plans to begin tapering its bond-buying stimulus programme. Record outflows from gold ETFs also hurt prices.
On Monday, Asian shares fell to a two-week low after growth in China's services sector slowed sharply last month. The dollar hovered near a four-week high, supported by an upbeat outlook
for the US economy.
Physical demand for bullion in China remained strong with premiums on the Shanghai Gold Exchange - a physical trading platform - climbing to about $20 an ounce from Friday's $17.
For the 99.99 percent purity gold, volumes traded on the exchange were 24.86 tonnes on Monday - the highest daily volume since May 3. - Reuters