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Financial Post: Gold has confirmed it is a safe haven

March 13, 2014

Source: Financial Post 

Gold’s 14% rally this year has confirmed that the precious metal is still viewed as a safe haven by investors, says Capital Economics.

“Safe-haven status is confirmed in bad times and gold has again passed that test,” said Julian Jessop, chief global economist at Capital Economics.

This year’s gold rebound has, in part, been fed by pessimism. U.S. economic data such as retail sales and employment numbers have missed expectations. Second, an emerging markets’ currency crisis broke out in January, raising fears of contagion. The resulting geopolitical unrest, including protests in Venezuela and Thailand, as well as a military standoff between Russia and Ukraine, helped spur even more demand for gold.

Most recently, weak economic data from China has been a new reason for investors to flock back into the precious metal.

“The continued recovery in the price of gold confirms that it has retained its safe-haven status despite the slump in the first half of 2013,” Mr. Jessop said. “We expect further gains.”

Gold is currently trading at US$1,365 an ounce and Mr. Jessop said it’s possible the precious metal could hit US$1,450 later this year.

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