Gold opens 2016 with a rally as Saudi tensions fan haven demand

Gold started the year with a 1 percent gain on Monday as geopolitical tensions between Saudi Arabia and Iran enhanced haven demand on bullion.

With investors looking for a safe haven amid geopolitical tensions and falling stocks, U.S. gold for February was up 4 dollars at $1079 an ounce, having touched $1082 a few hours ago.

Spot gold rose 0.9 percent to $1,069.20 an ounce by 0652 GMT, after earlier hitting a session high of $1,070.20. Spot gold is now on track for its biggest one-day rise in a month.

On Tuesday morning, the People’s Bank of China (PBOC) injected the most cash into the nation’s open-market operations since September, one day after weak manufacturing data for December sent Chinese equities crashing, sparking fresh concerns of a further slowdown in the world’s second-largest economy.

Saudi Arabia widened its rift with Iran on Monday, saying it would end air traffic and trade links with the Islamic republic and demanding that Tehran must “act like a normal country” before it would restore severed diplomatic relations.

“With index rebalancing probably taking place over the next couple of weeks, we may see some shifting of investment flows back into gold as an underperforming asset”.

“The risk-off sort of shift in trading overnight and from yesterday has clearly supported buying in the gold market”, Daniel Hynes, senior commodities strategist at Australia & New Zealand Banking Group Ltd., said by phone from Sydney.

Traders will examine the minutes of the Federal Reserve’s last meeting when they are released later on Wednesday for clues about the US central bank’s plans for interest rate hikes. Gold lost 10 per cent in 2015 for a third annual decline after the Fed increased rates for the first time since 2006, boosting the dollar and damping appetite for the metal, which doesn’t pay interest. Chinese stocks tumbled 7 percent, leading to a trading halt. On Monday, gold settled up 1.4% on the Comex division of the New York Mercantile…

-In a reflection of bearish investor sentiment, assets of SPDR Gold Trust, the top gold-backed exchange-traded fund, fell 0.18 per cent to 642.37 tonnes on Thursday, close to a seven-year low.