Stocks rebound and gold price starts to ease

Although they could not hold their early gains, prices remain elevated as economic concerns fuelled interest in the precious metal as a haven from risk, and on talk that weak US growth could start a further round of monetary easing.

Spot gold was up 0.7 per cent at $1,871.79 an ounce, having earlier risen as high as $1,894.10, building on its strongest one-week rise since February 2009. It is now up 31 per cent.

Investors flocked to the metal as a haven from the euro zone debt crisis, weakness in the US economy, and volatility in the currency markets. However, analysts are worried that August’s near 15-per cent rally has been overdone.

“People talk about gold as an insurance premium, but right now it’s a really high insurance premium to pay,” said Bayram Dincer, an analyst at LGT Capital Management.

Gold has benefited from the ultra-loose US monetary policy with successive rounds of quantitative easing undermining the dollar.