Gold dazzles: Yellow metal bursts above $1,300 as slowdown tremors spur new year rally

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Updated: January 4, 2019 7:49:55 AM

Gold smashed its way above $1,300 an ounce to extend a new year rally. Investors backed the metal with global equities in retreat, signs of a slowdown stacking up, and the oldest of havens showing its mettle as exchange-traded funds draw in increased flows.

Gold dazzles: Yellow metal bursts above $1,300 as slowdown tremors spur new year rally

Gold smashed its way above $1,300 an ounce to extend a new year rally. Investors backed the metal with global equities in retreat, signs of a slowdown stacking up, and the oldest of havens showing its mettle as exchange-traded funds draw in increased flows.

Futures advanced as much as 0.4 percent to $1,300.30 an ounce on the Comex, the highest price since June, and were at $1,299.60 at 9:20 a.m. in Singapore. Spot prices were not far behind, hitting as much as $1,298.39. The sustained U.S. government shutdown has also spurred a risk-off mood.

Gold has become the go-to commodity in the opening days of 2019 as investors contemplate a deteriorating worldwide outlook and factor in fewer Federal Reserve rate hikes this year. A gauge of U.S. manufacturing plunged by the most since the 2008 recession a day after Apple Inc. cut its revenue outlook, fueling concern that the trade war with China is taking a bigger-than-expected toll on growth. In recent days, there have also been strong signals of a slowdown in China.

READ ALSO | Apple plunges most in almost six years on IPhone slump

“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 took out the $1,300 level. Preiss cited the potential downturn in the global economy, possible central bank policy mistakes, and rising U.S. debt burden among factors that may inspire interest in bullion.

Fueling investor concerns about the outlook, Apple lowered its revenue outlook, citing weakness in China, fewer than expected upgrades to iPhones, and supply constraints to newer models of the Apple Watch and AirPods. That followed recent losses in U.S. equity benchmarks and warning signs about China.

Earlier this week, a report showed a contraction in China’s manufacturing, while factory gauges in Italy and Poland also sank. With equities faltering, global gold-backed ETF holdings added 67 tons last month, and in the opening days of the year rose further to the highest since June.

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