Gold is rallying into the end of the year as turmoil in global equities, the partial US government shutdown and concerns about the outlook for next year stoke demand, lifting prices to their highest in six months.
Bullion rose in early trade in Asia yesterday before levelling off, with the metal on course for the biggest monthly advance since August last year. Money managers are the most bullish on the prices.
The metal is proving to be a beneficiary of the sell-off that has engulfed global equities after US shares tanked on Monday, followed by losses in Asia on Christmas Day. Investors are turning away from risk amid further signs of dysfunction in Washington, with multiple sources of concern including US President Donald Trump's showdown with the Federal Reserve, the impasse over the budget and fall-out from the resignation of US Defence Secretary James Mattis.
"Overall, the latest move on gold should be a stark reminder to investors that gold in any form should be an essential part of any long-term investment strategy, as again the yellow metal has proven its weight when markets turn turbulent," said Mr Stephen Innes, head of Asia-Pacific trading at Oanda.
Spot bullion rose as much as 0.2 per cent to US$1,271.36 an ounce, the highest since June, before trading at US$1,268.13 at 9.02am in Singapore, according to Bloomberg generic pricing. This month, it is up 3.9 per cent.
Holdings in gold-backed exchange-traded funds have ballooned as shares fell and investors priced in expectations for fewer US interest rate rises next year.
They hit 2,187.2 tonnes on Tuesday, up more than 100 tonnes since mid-October.
The metal is proving to be a beneficiary of the sell-off that has engulfed global equities after US shares tanked on Monday, followed by losses in Asia on Christmas Day.
"This Christmas season, we have massive volatility in US stocks and the Nikkei sank into a technical bear market," said Huatai Futures' Xu Wenyu. "The US government shutdown has added to the market's list of worries."
Nine of 15 federal departments and dozens of other agencies shut down last Saturday after Mr Trump refused to sign a spending Bill that did not include money for a wall along the southern border. Negotiations to end the shutdown are expected to begin today.