Gold snaps back to bull market as prices surge on haven demand

[NEW YORK] Gold is back in a bull market for the first time since 2013, buoyed by investors snapping up the metal as they seek a haven from the turmoil rocking equity markets.

Bullion for immediate delivery settled at $1,264.25 an ounce on Thursday. That marks a 20 per cent gain from the recent closing low in December, meeting the common definition of a bull market.

Gold rallied 19 per cent this year, beating gauges in Treasuries, currencies and equities amid concerns the slowdown in global growth will hurt the US economy. That's also fuelling bets the Federal Reserve may delay interest rate increases this year, helping boost the investment appeal for bullion, which doesn't pay yields or dividends.

"You can't deny it's in a very strong uptrend, and investors are playing on that momentum," said Donald Selkin, chief market strategist at National Securities Corp in New York, who helps manage about US$3 billion. "The way things are going in the stock market, people are running to gold." Prices rallied Thursday as weaker-than-expected US factory orders and slower growth in service industries boosted demand for the metal as a haven. Growth in US service industries slowed for a fourth straight month in February, prompting the first job cuts in two years, according to a report by the Institute for Supply Management Thursday. The group's employment measure dipped below the expansion threshold for the first time since February 2014. Applications for jobless claims unexpectedly climbed last week, a Labour Department report showed Thursday.

The bullish sentiment in gold is being reflected in exchange-traded funds. Investors boosted holdings in gold-backed ETFs by 251.9 metric tons this quarter through March 2, poised for the biggest such gain since the three months ended June 2010. Holdings have been increasing after three straight years of withdrawals.

Open interest, a tally of outstanding contracts in Comex futures, climbed to the highest since October, suggesting "a continuation of the prevailing direction, which in this case is bullish," said Tai Wong, the director of commodity products trading at BMO Capital Markets Corp in New York.

BLOOMBERG