Gold caps best weekly advance since 2008

LONDON — Gold’s explosive start to 2016 has lifted prices to the highest level in a year as investors flee a bear market in global stocks, a weakening dollar and the fallout from the spread of negative interest rates.

Futures in the metal posted the biggest weekly jump in seven years even as prices fell on Friday, while a measure of gold mining shares was poised for the highest close since July.

Investors have bolted back to gold after the metal suffered three straight years of losses as a souring global economy, led by concerns over Chinese growth, pummels stock prices.

The turbulence has eroded expectations that the Federal Reserve will raise interest rates this year, hurting the dollar and adding to gold’s allure.

“Gold’s been like a hurricane drawing strength from different sources as it swept higher,” Andy Pfaff, chief investment officer for commodities at MitonOptimal Group, said by phone from Cape Town, after closing a long position in gold following its peak late on Thursday. “It’s all been very favourable for gold.”

In Bangkok, gold prices were unchanged at 20,800 baht per baht-weight on Saturday.

The Gold Traders Association announced the buying price at 20,700 baht and the selling price at 20,800 baht per baht-weight for bullion.

For ornaments, the buying and selling prices were 20,405.36 baht and 21,200 baht per baht-weight respectively.

The prices were adjusted six times on Friday, indicating high volatility, for a total gain of 550 baht per baht-weight from the previous day.

Jitti Tangsithphakdi, chairman of the Gold Traders Association, said on Saturday gold prices had climbed 2,600 baht per baht-weight in total since the beginning of this year.

As a result, people are now selling rather than buying the precious metal.

"The upward trend will likely continue in the short to medium term. But over the long run, the prices will be more volatile," he said.

Bullion climbed 7.1% for the week, the biggest such gain since December 2008. Gold futures for April delivery slid 0.7% to settle at $1,239.40 an ounce at 1.48pm on the Comex in New York.

Investors have poured funds into bullion-backed exchange-traded products in 2016, reversing a tide that saw assets shrink for three straight years. The holdings increased 1% to 1,587.5 tonnes on Thursday, the highest since July, according to data compiled by Bloomberg. They’ve expanded 8.6% this year.

Gold’s ascent has been so rapid that analysts may been forced to reassess their targets.

“The black-swan-esque panic that engulfed the markets this week has driven gold up faster than even the most bullish could have hoped for,” said Adam Finn, head of precious metals at Triland Metals in London. “A retracement downwards from here is highly likely and the subsequent strength of the dip buying should tell us much more about how willing the inflows are of staying in the trade.”

The Philadelphia Stock Exchange Gold and Silver Index rose 3.1% on Friday, heading for its highest close since early July.

“Our existing end-2016 forecast for the gold price is $1,250 per ounce,” said Julian Jessop, head of commodities research at Capital Economics Ltd. “We will probably be revising it up.”