Gold rallies as investors seek haven from slumping markets

London (Jan 14)  Gold rallied to a 12-week high on Wednesday as sharp falls in stock markets and other commodities prompted investors to buy the metal as a haven from risk, and as soft U.S. data weighed on the dollar.

Financial markets fell sharply after the World Bank cut its growth forecasts for 2015 and 2016, fuelling fears that the benefits of cheaper oil may be offset by anaemic growth and the threat of deflation.

The dollar meanwhile hit a four-week low against the yen after data showed U.S. retail sales recorded their largest decline in 11 months in December.

Spot gold rose to its highest since mid-October at $1,244 an ounce and was up 0.7 percent at $1,239.50 an ounce at 1445 GMT. U.S. gold futures for February delivery were up $5.80 an ounce at $1,240.20.

"It's no surprise that gold appears robust," Commerzbank analyst Daniel Briesemann said. "It is living up to its reputation as a safe haven as other cyclical commodities are tumbling, equity markets are down, and we are seeing higher risk aversion almost everywhere."

"This afternoon it's also clearly due to the weaker retail sales figures that gold is up," he added. "That has led to a weaker dollar."

U.S. stocks extended a three-day slide at the open on the global growth worries and the U.S. retail numbers.

Oil fell more than 1 percent after hitting a near six-year low on Tuesday, while copper slid 6 percent.

In the physical bullion markets, buyers turned cautious in Asia after gold failed to hold at the previous session's highs.

Premiums in top consumer China fell to around $3 an ounce over the global benchmark from $4-$5 in the previous session.

"Shanghai ... was not attracting a lot of attention today, so the intraday longs quickly began covering positions and putting pressure on the metals," precious metals house MKS said in a note. "Gold subsequently fell through $1,230, drawing out a light round of intraday stops and touching the day's low."

Among other precious metals, silver was down 0.3 percent at $16.94 an ounce, giving up some of the previous session's hefty gains. Spot platinum was up 0.3 percent at $1,239.15 an ounce, while spot palladium was down 2.5 percent at $791.20 an ounce.

Source: Reuters