Gold jumps to highest level in 8 months

Gold jumps to highest level in 8 months

Singapore - GOLD climbed beyond US$1,200 (S$1,674) an ounce on Thursday - spiking to its highest level in over eight months - after US Federal Reserve chair Janet Yellen indicated that further interest-rate increases could be delayed should the tumult in global markets continue.

The metal has been this year's best-performing commodity, fuelled by investors seeking a haven from slumping equities and weaker economies.

According to Bloomberg, gold had breached the US$1,200 mark by 8.37am, when it stood at US$1,212.54. By 6.13pm, it had hit US$1,221.00 - 3.26 per cent higher than Wednesday's close of US$1,182.43, and surpassing May 22, 2015's US$1,212.60.

At the same time, a new World Gold Council (WGC) report showed that gold demand grew 4 per cent or 45 tonnes to 1,117.7 tonnes in Q4 2015. Much of this growth (33 tonnes) was generated by central bank purchases, as the official sector further strengthened reserves. Demand was weaker in the fourth quarter, however, for both jewellery and technology (down six tonnes each).

For the full year, global gold demand in 2015 was virtually flat at 4,212.2 tonnes compared to 2014 - marking a fractional decline of 14 tonnes.

"After a challenging first half-year, gold demand steadied and strengthened between July and December. For the last two quarters, demand was bang in line with its five-year average," said the WGC report.

On the supply side, mine production fell 3 per cent in Q4 2015, from 841.2 tonnes to 813.3 tonnes - the first quarterly decline since Q3 2008. Annual production totalled 3,176.3 tonnes in 2015. This marked an increase of just one per cent, and the slowest annual growth rate since 2008.

Said Alistair Hewitt, head of market intelligence at WGC: "In a year that saw global economic and stock market turmoil, the first US interest rate rise in nine years and falling oil prices, demand for gold remained resilient, coming in at 4,212 tonnes for the full year. Official sector purchases, combined with strength in the Asian markets and continuing momentum in the US and Europe, reinforced gold's credentials as a portfolio diversifier, a wealth preservation tool and a hedge against a range of risks.

"Looking ahead, 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. 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."

Still, after posting its biggest rally to start a year since 1980, analysts have said that they expect gold to drop this month as Chinese consumers slow purchases that surged before the start of the Chinese New Year.

kellytay@sph.com.sg


This article was first published on February 12, 2016.
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