Gold Glitters : Bullion Soars On Safe Haven Demand

Gold futures surged by nearly 1.8 per cent in the domestic market on Monday, marking the biggest rally in a week in the overseas market as investors flocked to the safety of the precious metal amidst heightened tensions in the Middle East due to a Saudi-Iran diplomatic row, a China stock market plunge and worries over the health of the world economy, bolstering the safe haven appeal lure for Gold.

Saudi Arabia severed diplomatic ties with Iran, raising tensions in the oil-rich Middle East region. Saudi Arabia expelled Iran’s diplomats from the country after an attack on its embassy in Tehran to protest the Saudis’ execution of a well-known Shiite cleric, marking the worst crisis in relations between the nations since the late 1980s.

Global equities were in freefall mode, with markets in China plunging nearly 7 per cent which resulted in a trading halt, as the country’s manufacturing shrank at a faster pace in the month of December, raising fears over a hard landing in the world’s second biggest economy, bolstering the lure for Gold as an alternative asset.US stocks plunged with the Dow Jones Industrial Average tanking 1.58 per cent; the Nasdaq Composite dropping 2.08 per cent while S&P 500 shedding 1.53 per cent after US manufacturing contracted at the fastest pace since June 2009 in December 2015, signaling a worsening factory slump in the world’s biggest economy, prompting a flight to the safety of the yellow metal.

Gold futures may extend gains today as dismal US factory data raises speculation that the Fed may hike borrowing costs at a gradual pace this year, bolstering the lure for the bullion as a store of value.

At the MCX, Gold futures for February 2016 contract is trading at Rs 25,397 per 10 gram, up by 1.74 per cent after opening at Rs 25,040, against the previous closing price of Rs 24,962. It touched the intra-day high of Rs 25,521.