Gold may have finally snapped out of its inertia.
On Thursday, prices posted the biggest gain since June 2016, when the U.K. voted to exit the European Union, after a slump in global equity markets stoked demand for the metal as a store of value. Bullion received another shot in the arm after data showing weaker-than-expected U.S. inflation raised speculation that the Federal Reserve may slow the pace of interest rate increases.
Gold, which hit a 10-week-high of $1,226.42 an ounce on Thursday, had held near $1,200 since late August as traders weighed geopolitical risks that could boost the metal’s allure as a haven against rising interest rates that curb its appeal. On Friday, prices eased 0.3% to $1,220.40 by midday Asian trade, but were still poised for a second weekly advance.
“Gold markets finally showed some life, but it took an absolute pummeling on equity markets to trigger demand,” Stephen Innes, head of Asia Pacific trading at Oanda Corp. in Singapore, said in a note. The softer-than-expected CPI print and risk aversion remaining front and centre provided the catalyst to test significant resistance at $1,225, he said.
A gauge of gold-mining equities tracked by Bloomberg Intelligence also had the biggest increase since 2016 on Thursday. On Friday, as shares in Asia steadied, Newcrest Mining Ltd., Australia’s largest producer, rose 3.8% and Zijin Mining Group Co. climbed 5.1% in Hong Kong.