Gold is market turmoil's 'one beneficiary' as price surges above US$1,100

Gold has outperformed all other commodities since the turn of the year.
Gold has outperformed all other commodities since the turn of the year. PHOTO: REUTERS

SINGAPORE (BLOOMBERG) - Gold is refreshing its credentials as the go-to commodity in troubled times.

Bullion rallied above US$1,100 an ounce, rising for a fourth day to a two-month high, after Chinese shares plunged, the yuan slid and the country's stock exchanges closed early for the second time this week, spurring haven demand.

"Gold is probably the only one beneficiary among all the commodity markets from all the turmoil," said Bob Takai, chief executive officer and president of Sumitomo Corp. Global Research. "The stock market is down, so it's apparently a risk-off action by the investors."

Gold has outperformed all other commodities since the turn of the year after posting three straight annual declines as currency and equity-market weakness in China, coupled with rising geopolitical tensions in the Middle East and North Korea, boosted demand. The precious metal has climbed even as a gauge of the US dollar advanced to the highest level in more than a decade.

Gold for immediate delivery rallied as much as 0.8 per cent to US$1,102.85 an ounce on Thursday, the highest price since Nov. 6, and traded at US$1,099.65 at 1:15 pm in Singapore, according to Bloomberg generic pricing.

On the Bloomberg Commodity Index, which gauges returns from 22 raw materials, the metal has jumped 3.7 per cent in 2016 as base metals and oil tumbled, with Brent sinking to the lowest in 11 years.

China's CSI 300 Index tumbled 7.2 per cent on Thursday before trading was halted, while the onshore yuan weakened against the dollar to a five-year low after the central bank cut its reference rate by the most since August. China's regulator called an unscheduled meeting on the stock market, according to a person with direct knowledge of the matter.

"People are going to be concerned about emerging-market currencies and currencies related to China, so they'll be looking for things like gold, the yen, and the U.S. dollar," said Ric Spooner, a chief market strategist at CMC Markets Asia Pacific Pty.

"There are quite a lot of people in the market concerned about the possibility that those moves in China signify a reaction by authorities to an economy that might be weaker than many people think it is."