Gold hits near 12-week high as falling markets burnish appeal

By Vijaykumar Vedala

BENGALURU (Reuters) - Gold prices jumped nearly 1 percent on Monday to hit a near 12-week high as Asian shares resumed their fall and investors grappled with the impact of the ongoing Sino-U.S. trade war and higher U.S. interest rates.

Spot gold was up 0.9 percent at $1,228.24 an ounce, as of 0741 GMT. Prices hit a session high of $1,229.18 an ounce, a peak since July 26.

U.S. gold futures were up 0.8 percent at $1,231.80 an ounce.

"There is a huge change in sentiment when it comes to the yellow metal because it is playing the role of a safe-haven asset here. We see fund flows from the equity markets going into gold," Think Markets UK chief markets analyst Naeem Aslam said.

 

"Gold at its current level is highly attractive given the uncertainty we have out there."

Asian shares slipped on Monday, after a rebound in global equities late last week, with MSCI's broadest index of Asia-Pacific shares outside Japan down 1 percent. [MKTS/GLOB]

"Gold is more appealing after the stock market crash. It has regained some of its safe-haven lure," said Brian Lan, managing director at Singapore dealer GoldSilver Central.

A sell-off in equities last week, helped gold break above the narrow trading range of the past 1-1/2 months, with the metal jumping as much as 2.5 percent on Thursday, its biggest one-day percentage gain in more than two years.

"Gold remains supported by escalating geopolitical tensions ... Adding to the mix is the thought the FOMC may consider pausing their widely expected rate hike in December if global equity markets continue to falter," said Stephen Innes, APAC trading head at OANDA in Singapore.

"An abrupt shift in Fed policy will likely lead to a lack of confidence in the world's most important central bank and could destabilize markets further."

The Fed hiked rates last month for the third time this year and is expected to raise them again in December.

Gold remains about 10 percent down from its April peak, pressured by a strong dollar as the U.S.-China trade war unfolds and higher U.S. interest rates.

China faced "tremendous uncertainties" due to the impact of tariffs and trade frictions, China central bank governor Yi Gang said on Sunday.

Gold speculators extended their net short position on Comex gold contracts by 29,881 contracts to 103,009 contracts in the week to Oct. 9, data showed.

Meanwhile, holdings in SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rose 0.76 percent to 744.64 tonnes on Friday.

In other precious metals, platinum climbed 0.3 percent to $838.95 after touching its highest since July 26 at $844.50 an ounce earlier in the session.

Palladium rose 0.7 percent to $1,073.90. Silver was up 1 percent at $14.70.

(Reporting by Vijaykumar Vedala in Bengaluru; Editing by Richard Pullin and Sherry Jacob-Phillips)