Gold surges to 1-year high on financial uncertainty

Thu Feb 11, 2016 4:30pm EST
 
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By Marcy Nicholson and Clara Denina

NEW YORK/LONDON (Reuters) - Gold vaulted more than 5 percent on Thursday to a one-year high, on track for its biggest daily jump in more than seven years as financial uncertainty, a lower dollar and tumbling stock prices around the world prompted investors to seek refuge in bullion.

Volume of the most-active U.S. gold futures contract surged to the highest since late-2014 as investors poured into the market. Traders cited fears of financial instability and slumping bank shares on both sides of the Atlantic.

Investors grew more worried about banks' profitability in a low-growth and low-interest rate environment. U.S. Treasury yields tumbled in another safe-haven play that also bolstered demand for gold.

"The safe-haven seekers are moving back. We recommend clients add gold to their portfolios as insurance, if things turn out really bad, there will be much more upside," said Julius Baer analyst Carsten Menke.

"Look at the massive inflows into ETFs (Exchange Traded Funds) this year. They put the price recovery on a much more solid footing than any of the other recoveries we've seen over the past couple of years."

Spot gold XAU= was up 5 percent at $1,257.26 an ounce at 2:40 p.m. EST (1940 GMT), after surging 5.3 percent to $1,260.60, the highest since February 2015. It was on track for its biggest daily rise since January 2009.

"Due to the grave concerns, especially now due to the European bank system, there's a flight to safety into gold," said Jeffrey Sica, chief investment officer of Sica Wealth Management in Morristown, New Jersey.

"Gold has been in reverse correlation to stock markets so we anticipate further stock declines with further increased investment in gold."   Continued...

 
Gold bullion is displayed at Hatton Garden Metals precious metal dealers in London, Britain July 21, 2015. REUTERS/Neil Hall