Gold surges to 2-month high; bullion advances 0.9% as Chinese stocks tumble

By Agnieszka De Sousa

Gold surged to a two-month high as more declines in global stocks boosted demand for a haven and prompted traders to push back bets on when the Federal Reserve will next raise interest rates.

Bullion, which is this month’s best performing metal, advanced as much as 0.9% as Chinese equities tumbled to a 13-month low. Investors raised holdings in goldbacked funds to the highest since November and South African gold mining stocks rallied to the highest in almost a year.

Worries over the global economy mean US policy makers will probably be slower to raise borrowing costs. Lower rates benefit gold because the metal doesn’t pay interest. There’s now a 23% chance the Fed will increase rates by March, down from 51% at the start of the year, data compiled by Bloomberg show. Traders see no chance of a move at the two-day meeting starting Tuesday.

“Gold is continuing to profit considerably from its safe-haven status,” Daniel Briesemann, an analyst at Commerzbank in Frankfurt, said. “Weak Asian stock markets reflect the renewed uncertainty among market participants.” Bullion for immediate delivery gained 0.5% to $1,113.72 an ounce in London, after earlier touching the highest since November 4, according to Bloomberg generic pricing. It’s up almost 5% this month.

Gold closed above its 100-day moving average on Monday for the first time since October, a bullish signal for some analysts who study charts. It’s now trading near the 50% retracement of its drop from October to December, a Fibonacci level that some traders use to gauge whether a rally will continue or stall. Prices may climb toward $1,200 if they breach strong technical resistance of about $1,140.