Gold jumped to its highest in almost four weeks on Monday as fears of a global flu pandemic prompted investors to seek safer assets.
Fears of a global swine flu pandemic grew with new infections in the United States and Canada on Sunday, and millions of Mexicans hid indoors to avoid a virus that has killed 103 people.
Oil dropped more than 2% toward $50 a barrel while Asian stocks fell after the outbreak of swine flu battered shares of airlines and transport firms.
Precious metals tracked gold higher, other than platinum which is seen as an industrial metal and was hit by worries over the world economy should the flu outbreak spread and become a pandemic.
Gold hit an intraday high of $918.25 an ounce, its highest since April 2 on follow-through buying after China said last week its gold reserves had risen. The metal later slipped to $914.30, still $3.20 higher than New York’s notional close.
“I am not too sure how the swine flu will play out. The problem is the potential for this to explode to pandemic proportions leaving a lot of people very-very wary,” said Darren Heathcote of Investec Australia. “It may well benefit gold as gold would be seen as a safe haven,” he said.
Gold, which has registered four straight sessions of gains, has risen 5% over the past week and is 8% below an 11-month high above $1,000 hit in February.
“It looks like we have moved out of the 2-month downtrend and perhaps gold could head very much higher. The increase in Chinese reserves did play a part and I guess the technical traders will perhaps start coming in,” said a dealer in Singapore.
China revealed on Friday it had secretly raised its gold reserves by three-quarters since 2003, confirming years of speculation it had been buying. Dealers expected gold to face resistance around $932 -- an intraday high seen in early April.
“Ultimately, we could well be targeting that mid $960s again, which is that peak in the middle of March,” said Heathcote of Investec Australia.
The dollar index, a gauge of the greenback’s performance against six major currencies, climbed 0.4% to 85.099. But the US currency fell to a one-month low against the yen. The world’s largest gold-backed exchange-traded fund, the SPDR Gold Trust, said holdings remained unchanged at 1,104.45 tons on April 26.
The speculative long position in gold slipped to 128,367 contracts during the week to April 21 from, 129,895 during the week to April 14. (Reuters)