GOLD, SILVER BOUNCE BACK

GOLD ROSE yesterday as fears about the solvency of Chinese property group Evergrande sparked a flight to safe-haven assets, but gains were capped by strength in the dollar ahead of the US Federal Reserve policy meeting.

Spot gold price gained 0.6 percent to $1 764.76 (about R25 967) an ounce by 4.53pm. US gold futures advanced 0.8 percent to $1 765.40 an ounce.

Investors were rushing to the safety of bonds as fears grow of a default by Evergrande, driving a drop in yields that was helping gold, said Bart Melek, head of commodity strategies at TD Securities.

“People are reacting to what’s happening in China but this week’s Fed’s meeting is also important. Anything suggesting a fairly earlier tapering would be out of consensus and that would mean a pretty significant correction in gold prices,” Melek said.

The Fed’s Open Market committee meets from today until tomorrow.

Gold is considered as a hedge against inflation and currency debasement resulting from the widespread stimulus. A hawkish move by the Fed would, hence, diminish gold’s appeal, while an eventual interest rate hike would also raise the opportunity cost of holding the non-interest bearing asset.

World shares were lower as investors fretted about the spillover risk to the global economy from Evergrande’s troubles.

“No doubt those fears of systemic risk ... may well be feeding into the market,” independent consultant Robin Bhar said. “We typically see flows into the dollar, into gold, into the yen when investors are worried.”

But denting gold’s appeal for holders of other currencies, the dollar index hit a near one-month high.

Silver rose 0.2 percent to $22.44 an ounce, after hitting its lowest since November 2020. Platinum dropped by 2.1 percent to $921.55 an ounce, while palladium shed 3.4 percent to $1 948.24 an ounce.