Gold hits 7-week high on dollar, global equities decline

Gold hits 7-week high on dollar, global equities decline

24 August 2015, 17:01
News
0
1 202

On Monday gold climbed to fresh seven-week peak, as grinding drop in global equities and the U.S. dollar boosted demand for a haven metal.

Monday marked a drop of nearly 9% in the Shanghai Composite, the biggest one-day drop since February 2007, on investor disappointment that Beijing held back from launching fresh measures over the weekend to support stocks after markets fell 11% last week. Recently, Chinese equities have been under heavy selling pressure amid worries over China's slowing economy and fears that Beijing may allow its national currency to continue to depreciate.

On Monday the S&P 500 slid 2.2 percent to 1,928.22 at 10:53 a.m. in New York, with the benchmark down 9.6 percent from its May all-time high. The gauge pared a drop of as much as 5.3 percent. The Dow Jones Industrial Average lost 337.96 points, or 2.1 percent to 16,121.79. The Nasdaq Composite Index slid 2.1 percent to its lowest since February after earlier losing as much as 8.8 percent, Bloomberg reported.

The S&P 500 is on track for its worst August decline in 17 years. It sank the most since 2011 on Friday amid signs China’s economy is weakening. A gauge of volatility expectations more than doubled last week.

Comex gold for December delivery climbed to an intraday high of $1,169.50 a troy ounce, the most since July 7, before settling at $1,159.50.

Gold rallied as concerns over the health of the global economy fanned hopes that the Federal Reserve could delay raising interest rates till the very end of 2015.

Speculation had been mounting all year for the Federal Reserve to raise interest rates in September for the first time since 2006, following the end of quantitative easing in 2014.

However, traders are now pricing in less than a one-in-four chance the central bank will act next month, from about 48 percent just before the yuan devaluation, as the rout in equity markets has shaken confidence that the global economy will be strong enough to withstand higher U.S. rates, Bloomberg says.

Postponing in raising interest rates would be seen as bullish for gold, as it decreases the relative cost of holding on to the metal, which doesn't suggest investors any similar guaranteed payout.

Share it with friends: