GOLD PRICES held firm in a tight range on Monday in London, trading above $1155 per ounce as China’s ‘Black Monday’ panic grips global financial market.
The benchmark Shanghai Composite fell by up to 8.5 per cent, erasing all of its 2015 gains. China on Sunday finalized rules to allow its big government pension fund for the first time to buy stocks, a move that could free up billions of dollars for share purchases, the official government Xinhua News Agency reported.
Following China’s factory sector shrinking at its fastest rate in almost 6-1/2-years in August, a cut in bank reserve ratios expected by speculators failed to materialize.
The Hang Seng China Enterprises Index of Chinese stocks in Hong Kong fell 5.8 percent to its lowest level since March 2014 and the Japanese Nikkei lost around 2.8% to hit a five-month low, while the Australian S&P/ASX 200 was down 2.9%.
In morning trade, London's FTSE 100 index was down by 3.5%, while major markets in France and Germany lost more than 3%.
Brent crude fell below $45 a barrel for the first time since March 2009 and West Texas Intermediate (WTI) extended its losses below the $40 a barrel, also hitting a low since February 2009.
The Bloomberg Commodity Index lost as much as 2.2 percent to 85.8339 points, the lowest level since August 1999.
The US dollar index, which measures the greenback against a basket of currencies, retreated 0.4 per cent, a fourth straight loss, to 94.618 amid a recovering Japanese currency which investors treat as a safe haven asset, which was up 0.6 percent to 121.3 vs US dollar, its strongest since July 9.
"It is a China driven macro panic," said Didier Duret, chief investment officer at ABN Amro to Reuter. "Volatility will persist until we see better data there or strong policy action through forceful monetary easing."
"Certainly gold is finding itself a bit of a safe-haven bid with all the volatility that's going on in the markets," said Victor Thianpiriya, commodity strategist at ANZ Bank.
"If things do get a lot worse then gold will certainly go a lot higher."
Gold rose to $1,168.40 last Friday, its highest since July 7. It gained more than 4 percent last week, the most since mid-January.
According to data gathered by CFTC, the US regulator, last Tuesday COMEX gold futures & options net position of managed money turned bullish for 1st week in 5 weeks.
Silver’s net position of managed money also continued to be bullish last week after 7 bearish weeks.
According to the latest data from the International Monetary Fund, in July Kazakhstan increased its gold reserves about 2.49 metric tons to take its stash to about 208.14 tons as Malaysia bought 0.62 tons to hold 37.9 tons. Colombia sold 64 percent of its gold reserves to leave it owning just 3.76 tons.