Gold trades near 4-month high on safe haven demand

Spot gold was firm at US$1,278.21 an ounce at 0046 GMT, near a four-month high of US$1,281.50 reached on Friday - AFP Photo.

SINGAPORE: Gold held close to a four-month high on Monday as uncertainty in global markets pushed investors towards the safe-haven metal, with the focus this week on the European Central Bank's policy meeting.

Spot gold was firm at US$1,278.21 an ounce by 0046 GMT, near a four-month high of US$1,281.50 reached on Friday.

The metal gained nearly 5% last week after Switzerland unexpectedly abandoned a cap on the franc.

Dealers assumed that the Swiss National Bank had moved with the knowledge that the European Central Bank would take the plunge into full scale quantitative easing at its policy meeting on Jan 22.

The euro flirted with 11-year lows early on Monday as investors braced for the ECB to take its boldest steps yet to combat deflation and revive the euro zone economy.

Sources have told Reuters the ECB may adopt a hybrid approach – buying debt and sharing some of the risk across the euro zone while national central banks make separate purchases of their own.

Volatility before the ECB meeting could see gold add to gains this week, but moves could be in a tight range on Monday with the US markets shut for a holiday.   

In a sign of increasing investor confidence in the metal, speculators raised their net long position in gold for the third straight week ending Jan. 13, US Commodity Futures Trading Commission data showed on Friday.

Also, holdings in SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rose 1.92% to 730.89 tonnes on Friday.

That is the fund's biggest daily percentage jump since May 2010. Total holdings, however, were not very far from a six-year low. – Reuters