Gold price hits three-week high after Obama re-election

Investors rushed to invest in gold and its price climbed by as much as $21 an ounce in afternoon trade yesterday as the metal's status ...

Investors rushed to invest in gold and its price climbed by as much as $21 an ounce in afternoon trade yesterday as the metal's status as a safe haven asset is renewed following Barack Obama’s re-election as U.S. president.

Gold for delivery in December ended the day $17.80, or 1%, higher to settle at $1,731.80 in Wall Street yesterday. With geopolitical tension rising after reports from the Pentagon that Iran fired shots at a US unmanned airplane, investors flocked to seek the relative safety of gold, reports

Gold ETFs or exchange traded funds tracked by Bloomberg saw their physical holdings surge by more than 4 tonnes to a new record high of 2,592 tonnes.

The precious metal was also buoyed by news from Europe where the European Central Bank decided to continue with its highly accommodative interest rate regime.

Keeping markets supplied with easy money, as has been the case under US Federal Bank chairman Ben Bernanke's open-ended quantitative easing program that kicked off in December 2008, has added to gold's allure as an inflation hedge and storer of wealth amid currency depreciation.

Another issue counting in the gold price's favour over the near term is renewed worries in financial markets over the looming “fiscal cliff” in the U.S. in January when nearly $600 billion worth of spending cuts and tax increases are triggered that would put the country's economy in danger of sliding back into severe recession.

MarketWatch quotes Fawad Razaqzada, a technical analyst at GFT Markets as saying given Wednesday’s “vicious sell-off in the equity markets, the gains in gold and silver suggest they are once again viewed by some as safe- haven investment vehicles rather than risk assets.”

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