Gold heads for 7-week high

GOLD edged towards a seven-week high yesterday as a sell-off in global equities and the dollar burnished the metal’s safe-haven appeal, although weaker oil prices capped gains.

The dollar index fell for a fourth session in a row on strength in the yen, while Asian stocks eased on concern about global growth.

Gold is seen as an alternative investment to riskier assets such as equities. Weakness in the greenback also makes dollar-denominated bullion more attractive.

Five-year-low oil prices kept bullion gains in check. Gold tends to fall in tandem with oil as weaker energy prices dull the metal’s appeal as a hedge against oil-led inflation.

“It’s good that gold is able to stay above $1,200 despite another slump in oil prices. But it’s a little bit concerning that we haven’t been able to build on it with the dollar weakening quite a bit,” said a Hong Kong-based precious metals trader.

“If we stay near $1,230 for a while without making any progress, it might turn out to be bearish,” the trader said.

Spot gold had risen 0,2 percent to $1,229.40 per ounce in early morning trade.

The metal rose to a seven-week high of $1,238.20 on Wednesday, but failed to hold on to those gains and ended the day down 0,3 percent.

Safe-haven demand and short-covering have been behind gold’s recovery from four-and-a-half-year lows hit in November.

An improvement in sentiment was seen in the holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund. The fund saw inflows of nearly three tonnes on Wednesday, bringing total holdings to 724.80 tonnes.

That was the fund’s second consecutive day of inflows but holdings are still firmly near six-year lows.

“Should a combination of low oil and shaky equities plus increasing currency uncertainty promote investor risk aversion, then gold may gain on renewed safe-haven buying, especially if there’s even a hint of fresh sovereign risk concerns,” HSBC analysts said in a note.

Among other precious metals, silver gained for a fourth session to trade near its highest in more than a month.

Platinum and palladium gained about 1 percent each. – Reuters.