Gold rallies as stocks slip

Gold is up 1.4% as investors take their money out of equities and invest it in the precious metal.

Gold is trading at $1262 as a ‘flight to quality’ has boosted the metal, after last week’s knee-jerk reaction to increase interest rates by a number of central banks in emerging markets spooked the stock market.

Roughly $12 billion has flowed from the stock markets of emerging market countries, as international investors would rather play in safe. This outpouring of cash has found its home in gold as dealers often turn to the metal in times of uncertainty.

The US will be releasing the ADP employment report on Wednesday and initial jobless claims on Thursday, while non-farm payrolls and unemployment will be revealed on Friday. These announcements could give us an indication as to what the Federal Reserve will do next in terms of its monetary policy. A loose approach could keep gold in demand.

As Alastair McCaig suggested last month, the close above $1268 last week means we could retest the $1300 level.

Spot gold chart

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