Gold surges to one-year high on fears of financial uncertainty

By Clara Denina

LONDON (Reuters) – Gold surged nearly 4 percent on Thursday to its highest in a year as fears about financial instability, a lower dollar and U.S. Treasury yields persuaded investors to seek refuge in the precious metal.

Traders said financial instability fears were fuelled by European bank shares slumping to multi-year lows, with concerns mounting over banks’ profitability in a low-growth and low-interest rate environment.

Spot gold jumped as much as 3.6 percent to $1,240.90 an ounce, its highest since February 2015, and was up 3 percent at $1,233.70 at 1254 GMT. It is on track for its biggest daily rise since Dec. 1, 2014.

“We have a good explanation for gold’s rally; it is to do with worries about the U.S. economy and the rest of the world,” Macquarie analyst Matthew Turner said.

“Investors are concerned that central banks’ solution (is) negative interest rates or at least not raising rates – and that is gold friendly. The key risk to gold is that the U.S. economy manages to put in a good performance, like it did last year.”

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