Gold is getting a boost from weak equity markets, rising to its highest level in six months on Wednesday.
The precious metal, which is widely seen as a safe haven investment, touched $1,287.31 a troy ounce in early trading, its highest level since June 2018.
Gold disappointed investors last year, falling to a low of $1,160 a troy ounce in August despite rising trade tensions between the US and China.
But a sell-off in global equity markets and rising concerns about a slowdown in global economic growth has seen gold rise by 10 per cent since August.
Those fears were heightened on Tuesday with the release of weak data from China. The country’s manufacturing sector contracted for the first time in 19 months in December, according to a private survey.
Chinese stock markets fell by 1.37 per cent on the first day of trading after the new year, according to the Shanghai Shenzhen CSI 300 index.
Gold traders also expect the Federal Reserve to hold back on interest rate rises this year due to concerns about the strength of the US economy, which should be good for the metal.
“We think gold’s ‘safe-haven’ status remains broadly intact. However, headlines on geopolitical risks and uncertainty are unlikely to result in sustained gold upside – there needs to be an expectation of lasting effects on the economy,” said UBS analyst Joni Teves in a report.
“Gold’s safe-haven role is likely to become more evident as investors seek protection from uncertainty associated with an anticipated economic downturn, such as soft patches in economic data; a more prolonged and pronounced selloff in equities; a dovish shift in monetary policy, particularly in the US; or rising concerns about systemic risks,” she added.