Gold opens 2016 with a rally as Middle East tensions fan haven demand

Gold lost 10 per cent in 2015 for a third annual drop, the longest slump since 2000.
Gold lost 10 per cent in 2015 for a third annual drop, the longest slump since 2000.PHOTO: AFP

SINGAPORE (BLOOMBERG) - Gold climbed with silver on the first trading day of 2016 as rising tension between Saudi Arabia and Iran spurred a return to haven assets.

Bullion for immediate delivery climbed as much as 0.5 per cent to US$1,066.04 (S$1,518) an ounce and traded at US$1,064.04 at 12.29 pm in Singapore, according to Bloomberg generic pricing. The metal lost 10 per cent in 2015 for a third annual drop, the longest slump since 2000.

Gold, traditionally seen as a store of value during political turmoil, climbed after Saudi Arabia cut ties with Iran, a day after its embassy in Teheran was attacked to protest against the Saudi execution of a prominent Shi'ite cleric. While unexpected incidents last year such as the Paris terror attacks lifted prices briefly, gold still fell over 2015 as prospects for rising US interest rates boosted the dollar.

"When you look across the board, there's just a little bit of geopolitical risk coming back into the market," Mr Jonathan Barratt, chief investment officer at Ayers Alliance Securities in Sydney, said by phone.

Holdings in gold exchange-traded products declined 2.56 metric tonnes to 1,463.9 tonnes on Friday, near the lowest in more than six years, according to data compiled by Bloomberg. The assets shrank 8.3 per cent in 2015 to cap a third year of contraction.

Bullion of 99.99 per cent purity rose as much as 0.4 per cent to 223.85 yuan (S$49) a gram (US$1,068.84 an ounce) on the Shanghai Gold Exchange. Spot silver advanced 0.4 per cent to US$13.8728 an ounce, platinum dropped 1.2 per cent and palladium retreated 1.9 per cent.