Gold Heads for the Best Week Since 2011 as `Fear Is in Control’

  • Bullion advances in 2016 on global stock rout, negative rates
  • Miners head for highest close since 2013 on gold price, rand

 

Gold’s explosive start to 2016 has lifted prices to the highest level in a year as investors flee a bear market in global stocks, a weakening dollar and the fallout from the spread of negative interest rates.

The metal headed for its biggest weekly jump since 2011 even as prices fell on Friday, while a measure of gold mining shares was poised for the strongest close since 2013.

Investors have bolted back to gold after the metal suffered three straight years of losses as a souring global economy, led by concerns over Chinese growth, pummels stock prices. The turbulence has eroded expectations that the Federal Reserve will raise interest rates this year, hurting the dollar and adding to gold’s allure.

“Gold’s been like a hurricane drawing strength from different sources as it swept higher,” Andy Pfaff, chief investment officer for commodities at MitonOptimal Group, said by phone from Cape Town, after closing a long position in gold following its peak late on Thursday. “It’s all been very favorable for gold.”

‘Financial Problems’

Bullion slid 0.4 percent to $1,241.46 an ounce by 11:44 a.m. in London, up 5.8 percent for the week, according to Bloomberg generic pricing.

Investors have poured funds into bullion-backed exchange-traded products in 2016, reversing a tide that saw assets shrink for three straight years. The holdings increased 1 percent to 1,587.5 metric tons on Thursday, the highest level since July, according to data compiled by Bloomberg. They’ve expanded 8.6 percent this year.

Gold’s ascent has been so rapid that analysts may been forced to reassess their targets.

“The black-swan-esque panic that engulfed the markets this week has driven gold up faster than even the most bullish could have hoped for,” said Adam Finn, head of precious metals at Triland Metals in London. “A retracement downwards from here is highly likely and the subsequent strength of the dip buying should tell us much more about how willing the inflows are of staying in the trade.”

The FTSE/JSE Africa Gold Mining Index rose 1 percent Friday, with Sibanye Gold Ltd. and Harmony Gold Mining Co. Ltd both gaining more than 3 percent as increasing prices and a decline in the South African rand both played in their favor.

“Our existing end-2016 forecast for the gold price is $1,250 per ounce,” said Julian Jessop, head of commodities research at Capital Economics Ltd. “We will probably be revising it up.”

  • A Bloomberg survey showed analysts and traders were bullish for a sixth week.
  • Comex trading volume was 62 percent above the 100-day average for the time of day.
  • Silver fell 0.5 percent to $15.679 an ounce, platinum was down 0.5 percent at $955.30 and palladium rose 0.3 percent to $525.48 an ounce.

 

Original Article: Bloomberg

 

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