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Gold hits seven-month high

Bnamericas Published: Monday, February 08, 2016
Gold hits seven-month high

Gold climbed to a seven-month high on Monday amid further stock market jitters and an improving technical picture.

The yellow metal surged US$42.90 to US$1,193.25/oz in London, its highest close since last June, with silver edging up three cents to a three-month high of US$14.94/oz.

The gains came as stock markets in Europe and the US showed further weakness, driving up safe haven demand for gold, while the US dollar continued to trade mainly in the 89-90 euro cents range, down about three cents from the end of January.

The precious metals were also buoyed by recent weaker economic data in the US, including a mixed jobs report, and a more dovish stance from the Federal Reserve.

"The Fed decided to leave its federal funds rate unchanged at its January 27 FOMC [Federal Open Market Committee] meeting and stressed that it would closely monitor the global economic and financial developments to assess the US economic outlook," FastMarkets analyst Boris Mikanikrezai said.

"This dovish message was reinforced by mixed US data, which prompted investors to loosen further their Fed tightening expectations."

FEBRUARY OUTLOOK

Tailwinds which have lifted gold prices so far in 2016 are likely to continue during February, including an improving technical picture, with the metal moving above resistance at the US$1,110/oz mark, INTL FC Stone analyst Edward Meir said.

Weaker global economic reports and US data and stock market volatility have also supported gold.

"All in all, we think this constructive backdrop will likely remain in place for gold during February and see prices trading between US$1,140-1,215/oz over this month," he added. Silver will trade between US$14.50-15.60/oz, according to Meir.

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