Gold extends gains on stock rout, Middle East tensions
SINGAPORE, Jan 5 (Reuters) – Gold added to an overnight urge in prices on Tuesday, as escalating geopolitical tensions in the Middle East and a global stock market rout triggered safe-haven bids for the metal.
Spot gold rose 0.1 percent to $1,075.70 an ounce by 0044 GMT. On Monday, the metal had jumped as much as 2.2 percent to a four-week high of $1,083.30, before ending the day up 1.3 percent.
Saudi Arabia widened its rift with Iran on Monday, saying it would end air traffic and trade links with the Islamic republic and demanding that Tehran must "act like a normal country" before it would restore severed diplomatic relations.
Saudi Arabia executed Shi’ite Muslim cleric Nimr al-Nimr on Saturday, provoking protests among Shi’ites across the region. Iranian protesters stormed the Saudi embassy in Tehran, setting fires and causing damage, prompting Riyadh to cut ties and inflaming an already heated rivalry.
Also supporting gold was the tumble in global equities. A 7 percent slide in Chinese shares on Monday sparked by weak economic data rekindled worries over global growth on the first day of trading in 2016, and sent European and U.S. stocks diving.
Bullion, often seen as a alternative investment during times of geopolitical and financial uncertainties, benefited from the risk-averse sentiment along with the Japanese yen and U.S. bonds.
Gold prices, however, gave up some gains as oil prices turned negative after earlier climbing on Saudi Arabia-Iran tensions.
Safe-haven rallies tend to be short-lived and gold could see the focus shift back to U.S. monetary policy soon.
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Gold slid 10 percent last year on fears higher U.S. rates would lower demand for the non-interest-paying asset.
Kithmina Hewage- Institute of Policy Studies