Gold Hits 8-Day High as Insecurity Grows

The price of gold hit an eight-day high Thursday, boosted by a newfound enthusiasm for the metal as a hedge against wider market insecurity as investors wonder if, and when, the U.S. Federal Reserve might at last begin to wind back its vast program of stimulative asset purchases.

Spot gold rose to $1,410.73 a troy ounce in early European trade, up 1.3% on the day and its highest price since May 22.

While equity markets have been struggling in recent days–most notably the Nikkei, which shed over 5% Thursday–gold prices have been clawing back some ground, reflecting renewed investor interest in the metal as a traditional haven asset.

Although gold tends to perform well at times of loose monetary policy, reflecting its appeal as a hedge against the currency debasement and inflation, for now, investors seem more concerned by its relative appeal versus other, less buoyant, assets.

How other markets react to U.S. data is likely to prove key to gold’s performance in the sessions ahead. Although a weak set of numbers might logically boost gold prices, if the metal’s recent performance is anything to go by we could see positive economic news sharpen fears over a premature end to quantitative easing among equity investors, probably to the benefit of gold.

“The wider market is behaving counterintuitively at the moment,” said a London-based gold broker, speaking on condition of anonymity because he wasn’t authorized to comment publicly. “Good news is being seen negatively, and vice versa.”

While gold’s bounce this week has helped lift the metal price back above the closely watched $1,400-an-ounce level, it will take more than a few days of gains to erase the damage sustained by gold’s spectacular selloff last month. Before April’s tumble—which saw gold slump over 15% in just three sessions–gold was trading at around $1,565 an ounce, up 10% on Thursday’s high.

The Nikkei’s swoon gives battered gold some respite. Associated Press

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