Gold gained around 4% overall and overnight in Asia, hitting a nine-week high above $1,110 an ounce, with prices benefitting from major upheaval on the stock markets this week.
The spot gold price touched $1,112 during the session in Singapore on Friday, it’s highest since the beginning of November, but fell back sharply to around $1,097 amid a recovery for Chinese equities after Beijing allowed some appreciation in the yuan. Questions are now being asked over whether its “safe-haven” rally is over and done, The Week reported.
The precious metal has historically been a store of value in times of strain–and equity markets around the world have been in turmoil this week, particularly after a major slump in China. Such externally driven rallies tend to be short-lived, however, unless the underlying problems are prolonged and develop into a full-blown financial crisis as happened in 2008, after which gold embarked on a two-year surge.
Analysts at HSBC told Reuters that in the current environment, “the only way to trade gold is to take a view on the equity markets and on the Chinese market in particular”.
Should the 2% rise on the Shanghai stock market prove to be little more than a relief rally, gold could yet be set for further gains.
If, however, the calmer mood on equity markets persists, then the focus for gold will switch back to medium-term factors–interest-rates rises in the US in particular.
