Gold eyes best week in 4 years as market turmoil boosts haven appeal

Spot gold rises to $1,260.60 on Thursday, its highest in a year, before paring some gains to close up 4%

Gold on Friday clung to sharp overnight gains that pushed the metal to a one-year high, and looked set to post its best week in over four years as stock market turmoil stoked safe haven demand.

Stock markets fell worldwide on Thursday on fears over the health of the global economy and the banking sector, with MSCI's global stock index closing more than 20% below its all-time high. 

Safe-haven assets shone across the board. US 10-year Treasury yields hit their lowest since 2012, while the Japanese yen climbed to its highest in 15 months against the dollar.

Spot gold rose to $1,260.60 on Thursday, its highest in a year, before paring some gains to close up 4% in its biggest daily gain in about 2-1/2 years. On Friday, it eased 0.8% to $1,236.60 by 0042 GMT.

 

“The risk-off sentiment that pervaded markets overnight saw gold briefly push above $1,260 amid rising safe haven buying, making it the best performing commodity in 2016," ANZ analysts said in a note.

For the week, spot gold is up 5.5%, the biggest weekly gain since October 2011.

Tracking spot prices, US gold futures are set to post a gain of 7% for the week, the biggest such gain since 2008.

Also helping gold was dovish comments from Federal Reserve Chair Janet Yellen.

Testifying for a second day before US lawmakers, Yellen again stressed that the US central bank was not on a "pre-set" path to return policy to "normal" amid a worsening meltdown in global stock markets.

Yellen said she still expects the Fed will gradually raise interest rates this year, given a strong US labour market and steady economic growth.

That, however, did not deter investors from piling on to gold, a non-interest paying asset, as expectations grow that the Fed would not be able raise rates this year.

Assets in SPDR Gold Trust, the world's top gold-backed exchange-traded fund, rose 1.99% to 716.01 tonnes on Thursday, the biggest inflow in two months.

Jeffrey Gundlach, the co-founder and chief executive officer of DoubleLine Capital, said on Thursday that gold prices are likely to reach $1,400 an ounce as investors lose faith in central banks.