Gold made gains of nearly one per cent on Tuesday after stock markets dropped on growing fears for the global economy and a US bailout package to rescue distressed banks failed to calm fears
Gold made gains of nearly one per cent on Tuesday after stock markets dropped on growing fears for the global economy and a US bailout package to rescue distressed banks failed to calm fears.
Japan's Nikkei stock average tumbled to a five-year low shortly after the start of trade, sliding below 10,000 for the first time since December 2003 on worries about the state of the global economy and a surging yen.
Gold was trading at $863.25 an ounce, up $5.80 an ounce New York's notional close on Monday, when it gained almost 4 per cent on losses in equities markets - defying a rallying US dollar and weaker oil prices.
Weaker shares lift bullion's appeal as an alternative investment but dealers said declines in other commodities could potentially weigh on gold as well. The Reuters-Jefferies CRB Index, a global commodities benchmark, fell 5 per cent to a 13-month low.
"I suspect that gold would receive support from safe haven buying in the near term and that might help it, but to be honest the outlook is extremely uncertain," said David Moore, analyst at Commonwealth Bank of Australia in Sydney.
"Our forecasts are for gold going back down into the $700s in 2009. We quote the gold price at around $740, just above $740 ounce as at the end of June 2009," he said.
Gold struck record at $1,030.80 in March but has since traded in a wide range. It tumbled to an 11-month low $736 in early September before bouncing to its highest in two months at $920 late last month. Last week, bullion dropped to a two week low around $818 an ounce after the US House of Representatives voted to pass a $700 billion package to bailout the US financial system.
Governments around the world scrambled for new measures to contain the fast-spreading credit crisis as stock, bond and commodity markets bet on deepening uncertainty and a sharp downturn.
"I don't know if the crisis will spread to Asia but I guess safe haven buying is the most appropriate excuse to describe gains in gold prices. But there's no such thing as people rushing to buy gold bars or coins," said a physical dealer in Singapore.
"I think $820 will offer support for gold, while $900 will be the upside," said the dealer, referring to levels last seen in September. Premiums for gold bars were unchanged at $1 to the spot London prices in Singapore. In other markets, the yen edged up against the dollar and the euro but slipped against higher-yielding currencies as investors anticipated a coordinated global response to the credit crisis.
Oil bounced above $88 a barrel on Tuesday, having fallen to an eight-month low the previous day on fears the global economy would slip into recession. Platinum was trading at $957.00 an ounce, down $4.00 from New York's notional close on a technical rebound, having fallen to its weakest since November 2005 at $920 on Monday on fears of falling demand for autocatalysts. New York gold futures fell $0.6 an ounce to $865.6 an ounce on the COMEX division of the New York Mercantile Exchange.