Gold heads towards seven-month high

10/02/2016 08:02 AST

Gold rose on Tuesday as shares resumed falls, and was just below the 7 1/2-month high struck the previous day after growing concerns about the global economic outlook sent investors into safer assets.

The precious metal saw some profit taking in early trade after failing to push through key psychological resistance at $1,200 an ounce, but picked up after US markets opened and looked set to retest the $1,200 level.

Spot gold was trading up 0.5 percent at $1,196.9 an ounce by 1307 GMT, after rising to $1,200.60 on Monday, its strongest since June 22 last year.

"Once again buying has resumed. If we can reach $1,200 and hold above it that would probably set the scene to go higher," said David Govett, head of precious metals, at commodities broker Marex Spectron.

The fact that gold turned positive after US markets opened suggested exchange-traded funds, which are mostly US-based, were buying, he said.

Gold has gained 7 percent since the start of last week on rising demand for assets deemed to be less risky.

Strong demand for safe assets was underscored on Tuesday when the yield on Japan's benchmark 10-year government bond turned negative for the first time as the Nikkei stock index tumbled more than 5 percent, its biggest daily drop in nearly three years.

Fears that the global economy could slow sharply, or even tip into recession, and worries about some banks have battered share markets in recent days. European shares turned lower on Tuesday, after steadying in early trade, with the pan-European FTSEurofirst 300 falling to their lowest in more than two years, after skidding 3.4 percent on Monday.

Gold, which is now up nearly 13 percent this year, reversing last year's 10.4 percent loss, has benefited as some weak economic data recently prompted financial markets to scale back expectations for US interest rate rises this year.

Markets will be watching for any clues on monetary policy when Federal Reserve Chair Janet Yellen is due to appear before the House Financial Services Committee on Wednesday.

Trade Arabia