Gold prices have jumped over two per cent to more than a two-month high as tumbling global stock markets sent investors rushed to the safe-haven asset.
Spot gold rose by 2.6 per cent overnight to $US1,225.26, after hitting its highest since July 31 at $US1,226.27.
It was also the metal’s best one-day percentage gain since June 2016.
US gold futures settled up $US34.20, or 2.87 per cent, at $US1,227.60.
Bullion broke above a narrow trading range it has been stuck in for the past one and a half months, triggering fresh buying interest and forcing investors to cover their short positions, analysts said.
Wall Street extended its slide to a sixth session on Thursday after European stocks slumped to a 21-month low, pointing to growing risk aversion across global markets.
“A lot of people are running to gold as a safe-haven trade, diversifying into the asset and selling the dollar,” said Michael Matousek, head trader at US Global Investors.
“Now that gold has broken through the strong resistance level at $US1,210, a lot of new long positions are coming in.”
Meanwhile, US President Donald Trump, for a second day, criticised the Federal Reserve on Thursday, calling its interest rate increases a “ridiculous” policy that was making it more expensive for his administration to finance its growing deficits.
The Fed increased rates last month for the third time this year and is widely expected to raise them again in December.
“As a stock market selloff continues, gold is once again a desired destination in times of uncertainty,” said Alfonso Esparza, Senior Market Analyst at OANDA.
Gold has fallen more than 10 per cent from a peak in April, with investors increasingly switching to the safety of the greenback as the US-China trade war unfolds against a backdrop of rising US interest rates.
But prices have recovered from a one and a half year low of $US1,059.96 hit in mid-August, propped up by limited safe-haven buying at lower levels linked to concerns over economic growth and inflationary pressure from soaring oil prices.
Holdings in the SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, rose 1.2 per cent to 738.99 tonnes on Wednesday, the first gain since July and the biggest inflow since March.
Silver rose over two per cent to $US14.56.
Palladium rose 1.4 per cent to $US1,082.22, after hitting its highest since January 26 at $US1,096.80.
Platinum climbed 2.5 per cent to $US839.74, after touching its highest since July 26 at $US843.90.