Gold jumps as stocks slide

Gold has rallied over $30 today as dealers have taken their cash out of stocks and invested in the precious metal.

Gold is trading at $1318, up 2.8% on the day, after the US government managed to raise its debt ceiling to avoid defaulting.

Traders are flocking to the safe haven because they are worried that the US’s credit rating will be downgraded. Standard & Poor’s lowered its rating from AAA to AA in the summer of 2011 when the government last raised the country’s debt limit; ratings agency Fitch have now suggested they might do the same. Since the debt ceiling debate has effectively been postponed until February 2014, between now and then we could see equities lose more ground and gold make increased gains.

A survey at the financial news provider Bloomberg, however, has suggested that gold will continue to decline over the next four quarters and could fall to $1175 this time next year. The participants of the survey felt that a reduction in the US stimulus package will lower demand for the metal.

Spot gold chart

IGA, may distribute information/research produced by its respective foreign marketing partners within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

This information/research prepared by IGA or IGA Group is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. In addition to the disclaimer above, the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.

See important Research Disclaimer.