London: Gold held its ground near a three-month high and mining shares rallied as investors scaled back expectations for more US rate increases.
The metal was little changed after climbing Tuesday to the highest since November 3. An index of African gold miners jumped 4.3 per cent and holdings in exchange-traded funds backed by gold grew for a 12th day, the longest run in three years.
Traders are betting on a less than 50 per cent chance of a rate increase by the Federal Reserve this year, futures data compiled by Bloomberg show. Gold tends to fare well when rates are low as the metal only delivers returns through price gains. Expectations of a steeper trajectory of rate increases have been scaled back as turmoil reverberates in equity markets from Shanghai to New York.
“There’s been a confluence of factors supporting gold, one of which is the change in sentiment about how the Fed will proceed,” said Fiona Boal, a London-based director of commodity research at Fulcrum Asset Management, which oversees $3.7 billion (Dh13.59 billion). “On top of that, the rout we’ve seen in equity markets and in other commodities has made people nervous about the state of the global economy, with a greater allocation placed in gold.”
Bullion for immediate delivery was little changed at $1,128.68 an ounce by 11:15am in London after rising Tuesday to $1,131.08, according to Bloomberg generic pricing. Returns from the metal have outperformed all other members of the Bloomberg Commodity Index this year, advancing 6.4 per cent, as a gauge of global stocks sank 7.9 per cent.
