Gold added to its gains at the end of last week with a number of factors today driving the price higher, according to Scotia Mocatta.
“The main reason is that the Fed has highlighted concerns about the state of the global markets as a reason to delay raising [interest] rates.” the precious metals trading house said.
Keeping rates low will weaken the dollar, supporting gold, the bank said, but the devaluation of the Yuan and the subsequent impact on the emerging markets has been the main benefit to gold.
Investors will look to buy up the metal in times of economic weakness as it is traditionally seen as a safe haven.
Sticking with China, the uptick in interest from central banks, particularly the People’s Bank of China, should instil confidence in the metal.
The bank bought 16.2 tonnes in August, on top of the 19 tonnes in July and the 604 tonnes it bought between 2009 and June 2015.
Additionally, while 67% of reserves in Germany, Italy, France and the US are made up of gold, China only has 1.6% of its reserves in gold, and “it may be that China feels the need to accelerate its gold holdings,” Mocatta suggests.
Meanwhile, the Bank of America’s Michael Hartnett said he expects “a massive policy shift in 2016”, with China looking to quantative easing and currency depreciation, furthering concerns.
Overall, Scotia Mocatta said: “We are not overly bullish per se, but we expect prices to work higher.”
Gold was US$10 higher today to US$1,166.
Elsewhere, silver gained 1% to US$15.98 while platinum gained 1.5% to US$998.
Major Movers
Randgold Resources (LON:RRS) down 4p to 4,418p
Fresnillo (LON:FRES) up 5p to 740p.
Anglo American (LON:AAL) down 30p to 696p.