Global uncertainty gives gold safe haven tag again

Gold is once again gaining its safe haven appeal as the dollar has eroded in value and has been down to its October lows. It was last trading at 1.2 per cent softer at $1,175 against the euro.

“But we do not expect prices to break above the $1,200 psychological level,” said Mr Prithviraj Kothari, managing director, Riddhi Siddhi Bullion.

After weeks of global instability and central banks favouring a loose monetary policy, investors globally have increased their gold ETF holdings, which stood at 1,573 tonnes as of February 2 — a gain of 22 tonnes week-on-week and 92 tonnes month-on-month, he said adding that it is increasing everyday.

The other factor helping gold is depressed oil prices and low inflation.

All these factors, he said are raising concerns over the US Fed policy expectations and global economic development.

Investors are flocking to traditional safe-haven assets like gold and eschewing more risky instruments as 2016 has been characterised by frazzled markets and mounting tensions stemming from the global equities rout, he said.

Earlier this week, the Federal Reserve Bank of New York president William Dudley said that tighter financial conditions would be taken into account at the next Fed policy meeting in March. Investors interpreted this as a further delay in a US interest rate hike.

As markets await further news from the Fed, they are also awaiting the US jobs reports to see whether it created a negative or positive impact. Employment figures have been below target at 1,51,000 jobs added in January, against the forecast of 189,000. However, the unemployment rate did tick down to 4.9 per cent and wage growth was strong.