Gold Rises Above $950 to Seven-Month High on Recession Concerns
Feb. 17 (Bloomberg) -- Gold rallied over $950 an ounce to the highest in seven months in Asia as investors bought the metal as an alternative to slumping equities and to preserve their wealth as the global economy sags.
Bullion climbed to $958.50 an ounce, the highest since July 22, as the benchmark MSCI Asia Pacific Index tumbled by the most in three weeks on concern the deepening global recession will drive up funding costs and hurt trade.
“There’s a lot of money flowing into gold as the stock market continues to decline,” Ellison Chu, manager of precious metals at Standard Bank Asia Ltd., said by phone from Hong Kong.
Gold for immediate delivery gained 1.5 percent to $956.24 at 1:07 p.m. Singapore time. Bullion for April delivery was up 1.7 percent at $958.6 in after-hours electronic trading on the Comex division of the New York Mercantile Exchange.
“We’ve been seeing gold consolidate at $930-$940 for a while so it’s time to test higher levels,” said Chu. “Once $950 was broken, I think we saw some stop-loss orders kick in, which drove the market up quickly.”
Bullion also climbed on speculation that central banks may increase their gold reserves as a store of value.
“There’s been a lot of talk about central banks buying but they are quiet about it because they don’t want to disrupt the market, so the market tends to react when there’s some fresh news,” said Steven Zhu, trading manager at Shanghai Tonglian Futures Co. in Shanghai.
Russia’s central bank has raised gold’s share in reserves, and plans to continue this trend in 2009, Reuters reported today, citing first deputy chairman Alexei Ulyukayev.
The country’s bullion reserves were the world’s 11th largest stockpile in December, according to the World Gold Council.
December-delivery gold in Tokyo was up 2.6 percent at 2,851 yen a gram ($959 an ounce), while Shanghai gold for June delivery was up 1.2 percent at 207.70 yuan a gram ($945 an ounce) at 1:07 p.m. Singapore time.