Gold gains near 1-1/2-week top as risk aversion intact
MANILA: Gold rose to a near 1-1/2-week high on Thursday, with its safe-haven appeal intact as equities and oil gave up early gains, while the US dollar came under pressure.
Bullion has benefited from the risk-averse sentiment that has dragged equities and oil to multi-year lows and pushed investors towards assets considered a safe store of value.
It’s no surprise that gold has edged higher along with other safe-havens like the Japanese yen because “the risk aversion story is here”, said Barnabas Gan, an analyst at OCBC Bank in Singapore.
Spot gold was up 0.3 percent at $1,103.80 an ounce by 0709 GMT. It touched $1,109.20 on Wednesday, its highest since Jan. 8. As prices rose, physical gold demand in Asia slowed this week, curbing seasonal buying interest in China ahead of a big holiday and forcing sellers in India to offer a discount.
US gold for February delivery slipped 0.2 percent to $1,104 an ounce.
The metal has faced resistance around $1,100 as the threat of further US interest rate increases and a stronger US dollar suggest limited upside potential.
OCBC’s Gan sees gold at $950 by year-end. “This view is very much underpinned by our expectations for the Fed rate hike to occur three more times this year,” he said.
The Federal Reserve hiked rates for the first time in nearly a decade in December and Gan believes a firm US economy would warrant further rate increases, strengthening the dollar and curbing gold’s appeal.
But expectations of an immediate US interest rate hike in March diminished after consumer prices unexpectedly fell in December, offering signs of weak inflation.
BMI Research, part of ratings agency Fitch, also expects gold to fall below $1,000 due to the additional US rate hikes and a resilient US economy.
“However, we see growing risk of disappointing US economic growth. Should the Fed be forced to pause or even backtrack on rate hikes, $1,200/oz would look a likely upside target for gold in 2016,” BMI said in a report.
Spot platinum was flat at $819 an ounce after falling to a fresh 2008 low of $809.85 on Wednesday. Palladium gained 0.4 percent to $494.50 per ounce and silver was steady at $14.17.