Gold Rises As Worries About World Economy Spur Safety Buying

NEW YORK—Gold prices rose to the highest level in nearly four weeks as growth jitters burnished the appeal of relatively safe investments.

Investors in recent days have sold stocks and other assets sensitive to the outlook for the global economy, scooping up traditional havens such as Treasurys and the Japanese yen. That shift also has lifted prices of gold, which had fallen out of favor with many money managers in the past two years.

The prospect of higher interest rates in the U.S. has weighed on the gold market since early 2013, when Federal Reserve officials first hinted that the central bank would begin dialing back accommodative monetary policies in place since the financial crisis. That dulled the allure of gold, which yields nothing and costs money to hold.

But gloomy economic signals out of Europe and a slowdown in China have prompted many investors to push back their expectations for the Fed’s first rate increase, damping the urgency to sell gold and eliciting fresh bullish bets.

“There’s worry on the economic front and with the equity markets pulling back substantially, there’s uneasiness among investors causing buying in gold,” said Bob Haberkorn, a senior commodities broker with RJO Futures in Chicago. “Gold is mostly a fear trade at this point.”

An Australian gold-nugget coin. Gold is regaining its investor appeal. 

Gold futures on Monday rose 0.7% to $1,229.30 an ounce on the Comex division of the New York Mercantile Exchange. Gold is up 3.1% since hitting a four-year low on Oct. 3. The latest selloff in gold had come on the heels of a stronger-than-expected U.S. jobs report, which stoked the belief among some investors that the Fed would raise rates earlier than financial markets were anticipating.

Gold prices are down 35% from the record high of $1,888.70 an ounce set in August 2011, and many investors expect further losses when the Fed starts to raise interest rates. Some traders point to the brightening outlook for U.S. growth, which has bolstered the dollar and made gold, which is priced in dollars, more expensive for foreign buyers. Other market experts cite tame inflation that remains below the Fed’s 2% target level, and better yields in other assets as the reason they have cut back their gold holdings.

Still, traders say that fading confidence in the global economy is likely to support gold prices in coming weeks. The International Monetary Fund last week cut its forecasts for global growth to 3.8% for 2015, from its July forecast of 4%, warning that the eurozone could slip into its third recession in six years.

“We are not banging the table and saying this is something you need to own, but there are risks out there and that’s always something to keep in mind,” said Scott Winship, portfolio manager at Investec Asset Management in London, which has $120 billion under management.

Gold got a boost from the minutes of the Fed’s September policy meeting, released Wednesday, which showed that officials were growing more concerned with the threat that a slowdown in both Europe and Asia poses to the U.S. recovery.

“They’re assuring the market that they’re not going to raise rates too quickly,” said John Payne, senior market analyst with Daniels Trading in Chicago. “You’re hearing things that are little more dovish,” which is supporting gold prices, he said.

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