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Gold re-discovers safe haven status

|By Arabian Post Staff| Gold seems to be re-discovering its safe haven status in the wake of a turmoil that billionaire investor George Soros describes as the beginning of a global market crisis.

Bullion rallied above $1,100 an ounce, rising for a fourth day to a two-month high, after Chinese shares plunged, the yuan slid and the country’s stock exchanges closed early for the second time this week, spurring haven demand, Bloomberg reported. It also quoted George Soros as saying investors needed to be very cautious as global markets were facing a crisis.

“Gold is probably the only one beneficiary among all the commodity markets from all the turmoil,” Bob Takai, chief executive officer and president of Sumitomo Corp. Global Research, said by phone from Tokyo. “The stock market is down, so it’s apparently a risk-off action by the investors.”

The equities sell-off in the global market had its immediate fallout on the Dubai’s stock index, which sank more than 3 percent in early trade on Thursday. The index was down 3.2 percent at 2,974 points after 12 minutes of trade. It has technical support at the December low of 2,851 points. Selling was indiscriminate, with blue chip Emaar Properties losing 3.9 percent. Brent crude, a pricing benchmark for half the world’s oil, dropped to $32.94 a barrel, the lowest since April 2004.

Gold has outperformed all other commodities since the turn of the year after posting three straight annual declines as currency and equity-market weakness in China, coupled with rising geopolitical tensions in the Middle East and North Korea, boosted demand. Soros told a forum in Colombo, Sri Lanka that China is struggling to find a new growth model and its currency devaluation is transferring problems to the rest of the world.

The current environment “reminds me of the crisis we had in 2008,” Soros said. Bullion climbed 5.8 percent that year, at the start of the global financial crisis, then rallied 24 percent in 2009 and 30 percent the following year as equities markets collapsed.

“People are going to be concerned about emerging-market currencies and currencies related to China, so they’ll be looking for things like gold, the yen, and the U.S. dollar,” said Ric Spooner, a chief market strategist at CMC Markets Asia Pacific Pty. “There are quite a lot of people in the market concerned about the possibility that those moves in China signify a reaction by authorities to an economy that might be weaker than many people think it is.”