Picture: THINKSTOCK
Picture: THINKSTOCK

SINGAPORE — Gold rose for an eighth session out of nine on Wednesday, climbing towards a seven-and-a-half-month high as investors sought the safe-haven asset amid tumbling stock markets and concern about the global economy.

Global equity markets have been hit by worry over the health of the eurozone banking sector, with a very loose monetary policy expected to crimp bank profits and consequently their ability to repay debt.

That has triggered a rally in bullion, along with other safe-haven assets such as government bonds and the Japanese yen.

Spot gold was up 0.2% to $1,190.71/oz by 3.10am GMT, after hitting an earlier intraday high of $1,194.06.

The metal climbed to $1,200.60 on Monday, the highest since June 22, 2015. Gold would push higher on continued jitters in the global equity markets, dollar weakness, bullish technicals and a pick up in bullion investment buying, said INTL FCStone analyst Edward Meir.

Federal Reserve chairwoman Janet Yellen’s address to the US Congress later on Wednesday was also expected to support prices.

"We suspect her remarks will come across as unusually dovish, allowing the dollar to resume its descent and giving commodity markets a bit of a lift late in the day on Wednesday," Mr Meir said.

Ms Yellen will defend the US central bank’s first rate hike in a decade and is likely to insist that further rises this year remain on track, albeit at a slower pace. A slower pace on interest rate hikes could help bullion, which is a noninterest-paying asset. For the time being, traders will take cues from equities and other safe havens. Asian stocks dipped on Wednesday amid growing concern about the health of the global banking sector, particularly in Europe.

The Japanese government bond 10-year yield turned negative for the first time on Tuesday and the US treasury benchmark yield declined to a one-year trough.

The dollar was near 15-month lows against the yen. The gold price rally, however, has hurt demand from physical buyers of the metal. Gold prices in India slipped to a record discount as traders struggled to draw buyers. Dealers were offering a record discount of up to $25/oz to the London benchmark price.

Top consumer China is closed this week for the Lunar New Year holiday.

Reuters