Gold shines as investors shun risk

LONDON — Gold prices glistened last week, striking one-year highs as the precious metal benefitted from its status as a haven investment in times of economic turbulence.

With growing fears of another global recession, gold struck $1,263.47 an ounce, the highest level since February 6, 2015.

"Clearly, gold's status as the ultimate safe haven asset has well and truly been confirmed, yet again," said Fawad Razaqzada, analyst at City Index trading group. 

"The buck-denominated precious metal has also benefitted from a weaker dollar as hopes about further 2016 rate rises from the Federal Reserve have basically been dashed," he added.

Investors have been pouring into gold and other haven investments such as the Japanese yen, as stock markets tumble on rising concerns over the global economy, in particular regarding slowing growth in China.

"The gold price is benefitting from tailwind generated by stock markets... reflecting the risk aversion displayed by market participants," Commerzbank analysts indicated in a note to clients.

Despite worries over China, Asia's biggest economy and the world's second largest is still set to support demand for the metal going forward, industry body World Gold Council (WGC) predicted.

"Physical demand will continue to be supported by strong central bank purchases, and continued buying of jewellery, bars and coins by households across the world, led by India and China," said Alistair Hewitt, head of market intelligence at the WGC.

"If we just look at the year to date, the investment case for gold is as strong as ever. While stock markets have wobbled, gold has performed well," he added.

Hewitt spoke as the WGC published its report for 2015, which indicated that total demand for gold was virtually flat compared with a year earlier at 4,212 tonnes.

"Despite a challenging start to the year, gold demand rebounded in the second half of 2015 as a result of sustained buying from central banks and a strong second half from China and India," the WGC said in its latest Gold Demand Trends report.

"This was particularly evident in the retail investment sector, where bar and coin purchases were led by China and Europe, with strong support from the US, as investors took advantage of weaker prices amid a softening economic backdrop, financial turbulence and ongoing geopolitical tension," it added.

By Friday in late trading on the London Bullion Market, gold stood at $1,239.75 an ounce, compared with $1,150.35 one week earlier.

"After soaring the most since the 2008 financial crises to a one-year high, gold is seeing a pullback on profit taking," said CMC Markets analyst Jasper Lawler.

European stocks also rebounded Friday on higher oil prices, solid German economic growth and rising US retail sales, regaining some ground lost last week on fears of a global recession.

Gold's stellar performance meanwhile helped sister metal silver to reach a near four-month high at $15.96 an ounce last week.