Gold progressed above $1,300 an ounce to broaden a New Year rally. Investors flocked to the metal with worldwide equities in retreat, signs of stoppage stacking up, and the oldest of havens showing its mettle as exchange-traded funds draw in expanded flows.
Futures increased as much as 0.4 percent to $1,300.40 an ounce on the Comex, the highest price since June, and were at $1,299.60. Spot prices were not far behind, hitting as much as $1,298.60. The supported U.S. government shutdown has also spurred a risk-off mood.
Gold has become the go-to commodity in the starting days of 2019 as investors’ think about a worsening global view and factor in less, if any, Federal Reserve interest rate hikes this year.
A measure of U.S. industrial activity sank by the most since the 2008 crisis a day after Apple Inc. cut its income viewpoint, fueling worries that the trade war with China is taking a bigger-than-expected toll on development.
In current days, there have also been strong signals of a stoppage in China, the world’s second-biggest economy.
“This rally in gold is based on investors increasingly realizing that gold is ‘safe money’,” Rainer Michael Preiss, an executive director at Taurus Wealth Advisors Pte, said before prices broke $1,300. Preiss quoted the potential recession in the worldwide economy, probable central bank policy errors, and increasing U.S. debt burden among factors spurring demand.
Fueling investor worries, Apple this week lowered its income viewpoint, quoting weakness in China, less than anticipated upgrades to iPhones, and supply constraints to recently developed models of the Apple Watch and AirPods. That followed current losses in U.S. equity benchmarks and cautionary signs from China.
Earlier this week, a report showed a decrease in China’s industrial activity, while factory measures in Italy and Poland also dropped. With equities faltering, worldwide gold-backed ETF holdings added 67 tons a month ago, and in the starting days of the year increased further to the highest since June.
The rally past $1,300 is considered an important psychological hurdle that could spur additional purchasing, according to analysts including George Gero at RBC Wealth Management.
“The market has major worries about the economy, the stock market and political events” including Brexit, said Gero. “If investors keep looking for havens, the price could reach $1,350,” he said.
Fed Bank of Dallas President Robert Kaplan said the central bank should put rates on hold as it waits to see how uncertainties about development, weakness in interest-sensitive manufacturing, and tighter financial conditions play out. “We should not take any further action on interest rates until these issues are resolved, for better, for worse,” Kaplan told Bloomberg’s Michael McKee.
“The dollar is showing some signs of weakness especially against the yen, stocks are under pressure, yields are coming down, Fed rate expectations have been coming down as well,” said Ole Hansen, head of commodity strategy at Saxo Bank A/S. “If that trend continues, then gold will continue to assert its role as a safe haven.”
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