Gold Climbs in Longest Run Since October as Investors Seek Haven

  • Bullion rises above 50-day average; Newmont shares climb
  • `This is a fear trade,' says Michael Smith of T&K Futures

Gold advanced for a fourth straight day, the longest rally in almost three months, as a selloff in equities and a claim that North Korea detonated a hydrogen bomb boosted demand for a haven asset.

Bullion reached the highest in mid-November as stock markets around the world retreated. The atomic-test claims add to investor concerns spurred by Saudi Arabia-Iran tensions and China’s stock-market rout earlier this week that had already boosted gold’s appeal as a store of value.

“This is a fear trade,” Michael Smith, the president of T&K Futures & Options in Port St. Lucie, Florida, said in a telephone interview. “People are taking this one very seriously.”

Gold, which fell for a third straight year in 2015 as U.S. equities rose and the Federal Reserve signaled interest-rate increases, climbed above its 50-day moving average on Wednesday for the first time since early November. Newmont Mining Corp., the biggest U.S. gold producer, defied the sell-off in equities, rallying 1.4 percent, among the best performances on the Standard & Poor’s 500 Index.

Gold futures for February delivery advanced 1.3 percent to settle at $1,091.90 an ounce at 1:44 p.m. on the Comex in New York, marking the longest winning streak since Oct. 15.

Prices extended their gains after the market closed, reaching $1,094.90, the highest since Nov. 16, after the minutes of the Dec. 15-16 meeting of the Federal Reserve were released. The minutes showed the decision to raise interest rates last month was a “close call” for some policy makers who worried about too-low inflation and received assurances that their colleagues would closely monitor its progress.

Fed officials noted several times that monetary policy would ultimately depend on how the economy fared over time. “Members stressed the potential need to accelerate or slow the pace of normalization as the economic outlook evolved,” the minutes said. Policy makers have said the pace of tightening will be gradual. Higher rates curb the appeal of precious metals, which don’t pay interest like competing assets.

The climb above the 50-day average, a level often watched by traders and analysts who study chart patterns, may further improve trading sentiment, according to Jonathan Butler, a precious metals strategist at Mitsubishi Corp. in London.

“The world has begun 2016 in a bad mood and gold is a natural beneficiary,” Matthew Turner, an analyst at Macquarie Group Ltd. in London, said by phone. “Because global markets are in this negative mindset, the North Korea nuclear test is more supportive for gold than would have been the case at other times.”

Silver futures were little changed on the Comex in New York, while platinum declined on the New York Mercantile Exchange.

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