A gold refinery in Perth. The rally in gold is based on investors increasingly realising that gold is ‘safe money’, an analyst said. Image Credit: Bloomberg

Singapore, New York: Gold pierced the $1,300 level to extend a new year rally on Friday. Investors flocked to the metal with global equities in retreat, signs of a slowdown stacking up, and the oldest of havens showing its mettle as exchange-traded funds draw in increased flows.

Spot gold declined 0.2 per cent to $1,291.40 at 11:06am in London, after earlier touching $1,298.60, the highest since June. In New York, futures on the Comex touched $1,300.40 an ounce. Silver also gained to the highest since July.

Gold has become the go-to commodity in the opening days of 2019 as investors contemplate a deteriorating worldwide outlook and factor in fewer, if any, Federal Reserve interest rate hikes this year. On Thursday, a gauge of US manufacturing sank by the most since the 2008 recession a day after Apple Inc. cut its revenue outlook, fuelling concern that the trade war with China is taking a bigger-than-expected toll on growth. The partial US government shutdown has also spurred a risk-off mood.

“This rally in gold is based on investors increasingly realising that gold is ‘safe money’,” Rainer Michael Preiss, an executive director at Taurus Wealth Advisors Pte, said before prices broke $1,300. Preiss cited the potential downturn in the global economy, possible central bank policy mistakes, and rising US debt burden among factors spurring demand.

Earlier this week, a report showed a contraction in China’s manufacturing, while factory gauges in Italy and Poland also sank. With equities faltering, global gold-backed ETF holdings added 67 tons last month, and in the opening days of the year rose further to the highest since June.

The rally past $1,300 is considered an important psychological hurdle that could spur additional buying, according to analysts including George Gero at RBC Wealth Management. “The market has major worries about the economy, the stock market and political events” including Brexit, said Gero. “If investors keep looking for havens, the price could reach $1,350,” he said.

Fed Bank of Dallas President Robert Kaplan said on Thursday the central bank should put rates on hold as it waits to see how uncertainties about growth, weakness in interest-sensitive industries and tighter financial conditions play out. “We should not take any further action on interest rates until these issues are resolved, for better, for worse,” Kaplan told Bloomberg’s Michael McKee.

Among data due for release later Friday are payrolls figures for December. While the final report for 2018 is forecast to show employers added 180,000 jobs to cap a 2.45 million annual increase, the most since 2015, that monthly estimate is the lowest median projection since last January.

Also on Friday, Fed Chairman Jerome Powell is due to speak at an event in Atlanta, with investors set to parse remarks for his assessment of recent weakness, and the path for monetary policy this year.

“The dollar is showing some signs of weakness especially against the yen, stocks are under pressure, yields are coming down, Fed rate expectations have been coming down as well,” said Ole Hansen, head of commodity strategy at Saxo Bank A/S. “If that trend continues, then gold will continue to assert its role as a safe haven.”