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London - Oil’s woes are becoming good news for gold investors. The metal has recovered from a one-month low as crude’s tumble into a bear market and weaker equities spurred demand for a haven.
Bullion rose for a second day, rebounding from two weeks of almost constant losses. As oil’s slide pulled down oil and gas producers and weighed on stock markets, investors turned to traditional havens such as precious metals and the yen.
The fall in oil prices “has deteriorated investor sentiment,” Georgette Boele, a currency strategist at ABN Amro Bank NV in Amsterdam, said by email. This has “supported yen and gold and pressured emerging market currencies.”
Bullion for immediate delivery climbed as much as 0.7% to $1 254.89 an ounce and was at $1 251.21 by 12:38, according to Bloomberg generic pricing. The metal on Wednesday reached the lowest since May 17, before closing higher.
Gold, which is often seen a hedge against rising consumer prices, is starting to recover even as lower oil prices dent inflation expectations. That’s because the rout in crude may potentially slow the pace at which the Federal Reserve raises interest rates. The Fed increased borrowing costs for a third time in six months last week and had maintained its outlook for one more hike this year.
“A key driver of gold’s improved performance has been the fall in oil,” John Sharma, an economist at National Australia Bank, said by email “This has negatively impacted equity markets, hurt investor sentiment, and raised questions about the path of inflation and the outlook for interest rates.”
In other precious metals:
Silver gained 0.7% to $16.5869 an ounce. Platinum added 0.2% to $929.86 an ounce. Palladium lost 0.1% to $888.85 an ounce.
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