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PRECIOUS-Gold eyes best week in 4 years as stock market turmoil lifts haven appeal
February 12, 2016 / 10:28 AM / 2 years ago

PRECIOUS-Gold eyes best week in 4 years as stock market turmoil lifts haven appeal

* Gold up 5.5 pct on week after scaling one-year high

* Could go to $1,300 if stocks don’t stop falling, analysts

* Comex gold on course for best week since 2008 (Updates throughout, changes dateline to LONDON from SINGAPORE)

By Susan Fenton

LONDON, Feb 12 (Reuters) - Gold took a breather on Friday after soaring 4 percent the previous day but was still set for its best week in four years after stock market turmoil sent investors into safe haven assets.

Gold has benefited along with bonds and the Japanese yen from a rush to safety as investors worry about the health of some banks and the risk of a possible global recession.

They have been unnerved since the Bank of Japan, followed by Sweden this week, introduced negative interest rates to try and stimulate growth and now worry that if economic conditions deteriorate sharply the U.S. Federal Reserve might have to cut rates rather than raise them.

Bullion surged to a one-year high on Thursday, its biggest single-day percentage rally since 2013, and analysts and traders see more gains ahead if the weakness in equities persists. European shares picked up on Friday, gaining 2 percent, but analysts said the turmoil was not over.

Spot gold was down 0.7 percent at $1,237.36 by 1001 GMT, after rising to as high as $1,260.60 an ounce on Thursday, its highest since February last year.

U.S. Federal Reserve Bank of New York President William Dudley is due to speak at 1500 GMT on Friday and investors will be watching for any clues on the outlook for monetary policy.

“We are seeing a bit of temporary relief in financial markets today,” said Jens Pedersen, senior analyst at Danske Bank. “A lot will hinge on the Fed’s Dudley later today. Yesterday markets started to price in rate cuts in the United States. The market mood is slightly better today but Dudley’s comments can quickly reverse that or support it.”

While Fed chief Janet Yellen said this week that the U.S. economy is healthy and that interest rates would rise gradually, she did not rule out a cut in rates should conditions change.

Safe-haven assets have shone across the board in the past few days as equities plunged. U.S. 10-year Treasury yields hit their lowest since 2012 and the Japanese yen climbed to its highest in 15 months against the dollar, while money continued to flow into gold-backed exchange traded funds.

Spot gold has gained 5.5 percent this week, the biggest such gain since October 2011 and analysts say $1,300 could be its next target if financial turmoil continues.

“We are seeing a flight to quality,” said a Sydney-based trader. “ETFs have been accumulating the metal for some time now. They are one of the main drivers (of the gold rally) along with the equity markets which are extremely soft.”

U.S. gold futures have risen 7 percent for the week, the sharpest jump since 2008.

Assets in SPDR Gold Trust, the world’s top gold exchange-traded fund (ETF), rose 2 percent on Thursday, the biggest inflow in two months.

Total holdings of the top eight gold ETFs have risen by 3.8 million ounces so far this year, after three straight years of decline.

Silver was down 0.5 percent at $15.64 an ounce after touching $15.95 on Thursday, its highest since October.

Platinum was down 0.3 percent at $953.48 an ounce after reaching its highest since November on Thursday. Palladium was down 0.5 percent at $518.79. (Additional reporting by A. Ananthalakshmi in Singapore and; Manolo Serapio Jr. in MANILA)

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