Gold Surge to 3½-Month High

Gold prices rose to $1,174.73 per troy ounce during Asian morning hours, the highest level since July 1, before easing slightly to $1,172.48 per ounce.

The biggest headwind for gold earlier this year was the possibility of a rise in U.S. interest rates. That concern has eased since the summer, and gold has received further support since the Fed last week indicated economic conditions may not yet be right for an increase.

Since then the dollar has trended lower, benefiting gold prices which move in inverse relation to the U.S. currency. After remaining below $1,150 per troy ounce for almost a month, gold finally rose above that level at the end of last week and has continued rising higher since.

Meanwhile, there are signs of resurgent interest in gold-buying from Chinese consumers, many of whom are looking for alternative investments following the sharp fall in China’s stock markets since the summer.

Typically, most Chinese gold buying takes place between the Golden Week holidays in October and Lunar New Year in February, as shoppers buy gold for festivals and to give as gifts.

The surge in Chinese demand is likely to be supported by strong Indian demand over the next month and a half because of a series of Hindu festivals, when it is considered auspicious to buy gold. India and China together account for around half of global physical demand for gold.