Gold Rises on Safe Haven but Capped as Investors Cover Losses

Gold futures were holding up Monday morning despite a sea of red in global equity and commodity markets, drawing a safe-haven bid and also getting a boost from ideas that the freefall in other markets could prompt the Federal Reserve to hold off on tightening U.S. interest rates, analysts said.

However, even though yellow metal hit a fresh six-week high, it also is not racing sharply ahead – as it did on Friday when stocks also tumbled — with traders reporting that some investors are having to sell in order to raise cash to cover losses elsewhere.

China’s main stock index tumbled 8.5% overnight, erasing gains for the year amid continued worries about the health of the world’s second-largest economy. European and other Asian bourses tumbled, and the Dow Jones Industrial Average was down by 581 points in early U.S. trade.

Copper, silver, platinum and palladium – which have far more industrial applications than gold — were all down by 3% or more. Crude oil, copper and aluminum all hit their lowest levels since 2009.

Against this backdrop, as of 9:44 a.m. EDT, Comex December gold was $2.40 higher to $1,162 an ounce.

“Gold on one hand is a place where we go for a safe haven,” said Phil Flynn, senior market analyst with Price Futures Group. “We’ve seen that during the last couple of weeks. That’s definitely giving the gold market a little bit of support.”

Meanwhile, the September U.S. dollar index was down 2.28 points, or 2.4%, to 92.725. Gold often moves inversely to the U.S. currency.

“Gold is mainly benefitting from the U.S. dollar being biased to the downside,” said Bart Melek, director of commodity strategy for TD Securities. “We saw a big swoosh down in the U.S. currency.”

via Kitco

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza