Gold Gains as Global Markets Plummet
Now is a good time to invest in gold as gold prices rose on Wednesday 20th January 2016.
Although global markets continue to plummet gold is seen as a “safe haven” and the precious metal’s popularity has consequently increased.
Gold’s gains surfaced as stock markets around the world once again sold off sharply, with China’s Shanghai Composite Index falling 1%, Japan’s Nikkei falling 3.7%, and Europe’s Stoxx 600 index falling 3.2%. The Dow Jones Industrial Average was down 2.3% in afternoon trading. The U.S. oil benchmark sank to a new 12-year low. Treasury yields were on track to end at their lowest level since April and fell below 2% for the second time this year.
Gold futures for the most actively traded February contract rose 1.5% to settle at $1,106.20 a troy ounce on the New York Mercantile Exchange, their highest since Jan. 7. Gold suffered in 2015 as the Fed marched toward its first interest-rate increase in nearly a decade, but has recovered recently amid global financial market turmoil and fears that economic growth is slowing.
Due to investing in gold has helped this precious metal gain 4.3% an ounce since the beginning of 2016.
“It is a case of risk-off and people investing in U.S. bonds and gold, which would be the flight to safety,” said Graham Leighton, a precious metals broker at Marex Spectron in New York. “If you look at the state of the world, there are not many places to go as a safe haven.”
Gold is expected to continue it’s good form with expectations that it could help push the next U.S. interest-rate increase further into the future. U.S. rate increases make gold less competitive with interest-bearing securities such as Treasurys while they also boost the dollar.
”It now looks as likely as not that we’ll see the first rise in December 2016,” said Jonathan Butler, precious metals strategist at Mitsubishi Corp.
Platinum futures were down 1.3% at $819.20 an ounce. Investors are junking some of their holdings in the face of Chinese demand worries, the declining diesel-engine share of the car market, and as the weak South African rand is pushing supplies onto the market.
The metal is predominantly used in the manufacture of car autocatalytic converters, which reduce toxic emissions.
With 2016 car sales growth expected to be strong and mine output ultimately falling, though, “this suggests the price should rally, unless investors continue to lose faith in the long-term story,” said Macquarie in a note. “We see the problems but believe they are overstated.”
Among other precious metals, silver gained 0.3% to $14.160 an ounce and palladium fell 1.6% to $489 an ounce.
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