GOLD PRICES traded up to $1122 per ounce Monday morning in London, adding $4 from Friday’s close as world stockmarkets fell after China's manufacturing sector showed its worst decline in 3.5 years.
Already gaining 5.4% versus the Dollar in January – the biggest monthly jump in a year – gold has so far risen almost twice as fast this year as silver, now adding 3.0% to trade below $14.30 per ounce Monday morning as commodities fell hard once again.
Crude oil dropped almost 4%, back to $32 per barrel, while the broad Rogers International index of raw materials lost 1.4% by the start of New York trade.
"Only gold has been spared the generalised decline in commodity prices," writes multinational financial services firm Allianz's chief economic advisor Mohamed El-Erian in the Financial Times.
"In the context of a rising interest rate outlook in the US, it's going to be
very difficult for gold to hold on to these gains," reckons Mark Keenan, French investment bank Societe Generale's head of commodities research in Asia.
"But one positive lesson we can learn from [last] month," says Australian bank Macquarie's metals analyst Matthew Turner, "is that gold
does still have a safe-haven role.
"That could stand it in good stead through a testing year to come."
Data from China's National Bureau of Statistics today showed manufacturing activity in the world's second-largest economy contracting for the sixth straight month in January, with responses to its survey of purchasing-managers giving a reading of 49.4 on the PMI index – the weakest since August 2012.
Calling Beijing's policy response to China's slowdown and latest stockmarket crash "clumsy", US Fed voting member Robert Kaplan said he sees "
good reason to be patient [and] take more time to assess the impact on the US economy" before raising rates again.
"Strong inflows into gold exchange-traded funds, Chinese buying ahead of the Lunar New Year and support from the volatility in other asset classes combined to boost gold in January," says SocGen's Keenan.
"Maybe things won't be this bad next month in the wider markets," adds Turner at Macquarie. "So it is possible that if ETF flows are subsiding, prices will be lower too."
Although unchanged last week, the number of shares in issue for the world's largest gold-backed exchange-traded fund – the SPDR Gold Trust (NYSEArca:GLD) – rose 4% in January, the biggest growth since January 2015.
That meant the trust needed an additional 26 tonnes of bullion, reaching a 7-week high of 669 tonnes.
Bullion holdings at the iShares Silver Trust (NYSEArca:SLV) in contrast shrank over 260 tonnes to a 3-year low of 9,626 tonnes as investors cancelled 2.6% of the shares in issue last month.
