Picture: ISTOCK
Picture: ISTOCK

SINGAPORE — Gold on Friday clung to sharp overnight gains that pushed the metal to a one-year high, and looked set to post its best week in more than four years as stock market turmoil stoked safe haven demand.

Asian shares slid as mounting concern about the health of European banks further threatened a global economic outlook.

MSCI’s global stock index closed more than 20% below its record high, while safe-haven assets shone across the board. US 10-year Treasury yields hit their lowest since 2012 and the yen climbed to its highest in 15 months against the dollar, while money continued to flow into gold-backed exchange-traded funds (ETFs).

Spot gold rose to $1,260.60 on Thursday, its highest in a year, before paring some gains to close up 4% in its biggest daily gain in about two-and-a-half years.

On Friday it eased 0.9% to $1,235.85 by 3.35am GMT.

"We are seeing a flight to quality," said a Sydney-based trader. "ETFs have been accumulating the metal for some time now. They are one of the main drivers (of the gold rally) along with the equity markets which are extremely soft."

Assets in SPDR Gold Trust, the world’s top gold ETF, rose 2% on Thursday, the biggest inflow in two months. Total holdings of the top eight gold ETFs have risen by 3.8-million ounces so far this year, after three straight years of decline.

The risk-off sentiment has made gold the best-performing commodity in 2016, ANZ said, while others predicted further gains.

Yuichi Ikemizu at Standard Bank in Tokyo said "$1,300 would be possible if stocks don’t stop falling".

Jeffrey Gundlach, co-founder and CEO of DoubleLine Capital, said gold was likely to reach $1,400 as investors lost faith in central banks.

For the week, spot gold is up 5.5%, the biggest weekly gain since October 2011.

US gold futures are set to post a gain of nearly 7% for the week, the sharpest such jump since 2008.

Also helping gold were dovish comments from US Federal Reserve chairwoman Janet Yellen, who stressed that the US central bank was not on a "preset" path to return policy to "normal" amid a worsening meltdown in global stock markets.

Though Ms Yellen said she still expected the Fed to gradually raise rates this year, federal funds rate futures have almost completely priced out the chance of a rate hike.

Platinum was down $6.64 or 0.7% at $949.85 and palladium lost $2.62 or 0.5% to $518.83.

Reuters