Gold prices reached the highest level since August 15 at $1,305.25 an ounce as the International Monetary Fund (IMF) lowered its projection for global economic growth for 2015 at 3.5%, 0.3% from an earlier projection.
In the wake of increased volatility on the global front, gold is emerging as a safe haven asset class.
“Previously, gold had been subjected to volatility and a wide trading band of around $1,200 to $1,900 an ounce but the current trading sentiment showed that the precious metal was ‘redefining’ itself as a safe haven asset class,” said Pong Teng Siew, research head at Inter- Pacific Securities.
The events of last week namely the de-pegging of Swiss Franc to Euro and the sharp fall in China’s stock market precipitated the ascension of gold prices.
To further exacerbate the situation, the franc is one of the five global reserve currencies, and its nearly 20% appreciation starting January 15 has painfully hit a wide variety of asset classes worldwide, putting some of them on the edge of becoming ‘toxic assets’.
China, at least up until recently, used to be a locomotive of global manufacturing, generating an immense demand for natural resources. Now, the financial turmoil in Shanghai and Shenzhen only adds to the bitter situation in various global commodities markets, mainly oil.
The alarming situation on global markets has prompted investors to search for safe havens for their money, and while the uncertainty in the global markets, except for the US, prevented investors from excessively buying stock in Europe or Japan, gold has become one of the most sought after assets.
The Swiss National Bank (SNB) cancelled the Franc’s peg to the euro ahead of the today’s policy meeting at the European Central Bank (ECB). The ECB is widely anticipated to announce stimulus measures, triggering a slump in the euro FX rate, therefore the Swiss opted to let their currency appreciate rather than go down with the euro.
“While gold tends to weaken with the euro, which is expected to fall further against the dollar as the ECB looks set to announce quantitative easing this week, gold also benefits from haven demand because of the uncertainties,” Huang Wei of Huatai Great Wall Futures Co, said as quoted by Bloomberg. “We expect gold to be supported ahead of the elections in Greece and seasonal Lunar New Year demand.”
Gold’s role as hedge instrument has been increasing since the global recession of 2008, but at this point, amid the speculations about a possible re-monetization of gold, the yellow metal is universally perceived as a safe haven against financial shocks and short-term turmoil.
Ranjit Singh
Thu Jan 22 2015
Gold prices reached the highest level since August 15 at $1,305.25 an ounce. - File pic
'No one will win a trade war,' China says after Trump tariff threat
Donald Trump says he would impose the tariffs until China stops the flow of illegal drugs, particularly fentanyl, into the United States.
What has caused Pakistan's deadly clashes between police and supporters of Imran Khan?
Topping the demands of Khan's Pakistan Tehreek-e-Insaf (PTI) party is the release of all its leaders, including Khan, who has been jailed on a series of corruption charges since August 2023.
One woman or girl killed every 10 minutes by intimate partner or family member - UN
The report highlights that "60 per cent of all female homicides" are committed by "people closely related to them".
Sweden urges Chinese ship to return for undersea cable investigation
Two subsea cables, one linking Finland and Germany and the other connecting Sweden to Lithuania, were damaged in less than 24 hours.
[COLUMNIST] Building more highways won’t solve traffic congestion - reducing demand will
It is clear that adding more lanes and highways doesn't work, because we are still attempting the same approach to solve the issue.
Hyundai to invest RM2.16 bil in Malaysia through strategic partnership with INOKOM
This investment includes efforts to upgrade INOKOM's existing assembly capacity to meet Hyundai's automotive needs.
‘C4Cinta’ sets record as highest-grossing Malaysian Tamil film
'C4Cinta', directed by young filmmaker Karthik Shamalan, has set a new benchmark in Malaysian Tamil cinema.
Man charged with mother's murder, storing body in freezer
The court denied bail and scheduled case mention on Feb 7 for the submission of forensic, autopsy, and chemist reports.
Abolition of examination in schools to reduce pressure on pupils - Fadhlina
The classroom assessment approach offers a much more interesting learning ecosystem, says Fadhlina Sidek.
Google, Meta urge Australia to delay bill on social media ban for children
Google and Meta says the government should wait for the results of an age-verification trial before going ahead.
Judge tosses Trump 2020 election case after prosecutors' request
It represents a big legal victory for Donald Trump, who won the Nov. 5 US election and is set to return to office on Jan. 20.
DHL plane crash in Lithuania leaves authorities searching for answers
Rescue services said the plane hit the ground, split into pieces and slid over 100 metres (110 yards).
National squad to hold friendly matches for 2025 Indoor Hockey World Cup
The warm-up matches will involve matches against better ranked teams in the world, namely Austria (first) and Belgium (third).
G7 seeks unity on ICC arrest warrant for Netanyahu
The United States, part of the G7, has rejected the ICC decision, with President Joe Biden describing it as outrageous.
Francissca Peter remembers Tan Sri Ahmad Nawab: A tribute to a musical legend
A legend who has influenced our music for decades, was one of the highlights of my career, says Francissca Peter.
TikTok decision coming soon as Jan. 19 divestment deadline looms
Judges are reviewing TikTok's challenge to a law requiring ByteDance to sell its US assets by Jan. 19 or face a ban.
Lebanese sources: Biden, Macron set to announce Israel-Hezbollah truce
In Washington, White House national security spokesperson John Kirby said, "We're close" but "nothing is done until everything is done".
PM meets chaebol tycoon to attract more FDI to Malaysia
Chaebols are prominent figures from South Korea's family-owned conglomerates.
Govt won't allow non-citizen vehicles to enjoy RON95 subsidy - Economy Ministry
The implementation of the RON95 subsidy in 2025 is expected to provide savings of RM3.6 billion to government expenditure.
Ringgit opens lower as greenback gains ground
Dr Mohd Afzanizam says the market responded positively to news of hedge fund manager Scott Bessent heading the US Treasury Department.