Gold hit a four-week high on Wednesday, extending gains for a third session, as persistent concerns over the Chinese economy battered stock markets, while tensions simmered in the Korean peninsula and the Middle East.
The metal is closing in on key chart levels, including the December high at $1,088.70. A push above $1,088 would indicate that gold may have bottomed out for now after twice rebounding from the $1,045 area in December, technical analysts said.
Spot gold was up 0.6 percent at $1,083.76 an ounce at 1047 GMT, while U.S. gold futures for February delivery were up $5.10 an ounce at $1,083.50. Earlier it reached its highest since Dec. 7 at $1,085.60.
“Some risk aversion prompting safe haven flows has helped gold to stabilize and now test resistance,” Societe Generale analyst Robin Bhar said. “Physical demand has been pretty strong at the lower levels.”
“As we go higher, we could see some of that physical demand beginning to slow. Now we need investors to jump back in and look to hedge some of the uncertainties over global growth, over China, with positioning in gold.”
World stocks fell for a fifth day on Wednesday as China fueled fears about its economy by allowing the yuan to weaken further, and a nuclear test by North Korea added to a growing list of political worries.
North Korea said it successfully tested a miniaturized hydrogen nuclear device on Wednesday, setting off alarm bells in Japan and South Korea.