Daily Gold Update

Source: Bill Musgrave, American Gold Exchange

Austin— Gold surged 1.4% to close at an 11-week high above $1,120 as China worries, market volatility, and a weaker dollar spurred safe-haven inflows.

The Shanghai Composite Index, China's primary stock market, plunged more than 6% in frenzied selling as investors grew increasingly uneasy about the PBOC's ability to support the yuan and revive the slumping economy. Chinese shares have lost 22% so far this year. Other indexes in Asia were also pulled sharply lower.

U.S. and European equities rallied, however, as oil prices surged 4% after an OPEC official signaled that the cartel is "willing to cooperate" in mitigating the global supply glut that has hammered prices to 12-year lows. The Dow gained more than 1.5%, boosted by energy shares and strong earnings from blue chips like P&G and 3M.

The dollar weakened by 0.2% against major rivals as traders speculated that the FOMC, meeting to today to discuss monetary policy, will be disinclined to raise rates this spring because of China's slowdown and rising volatility in equity markets.

As China's stock markets and currency fall, demand for gold is rising. Net gold imports into China jumped from 79 tonnes in November to almost 130 in December, the highest level in more than two years. Total imports for 2015 topped 861, beating 2014 by nearly 50 tonnes. Reuters reports prospects for 2016 are even better, with some Asian traders expecting imports to challenge the all-time high of 1,158 tonnes set in 2013.

Global metals consultancy GFMS is forecasting gold to rebound in 2016, rising to $1,200 by year-end because of growing Chinese demand, slowing global growth, and a slower pace to increases in U.S. interest rates in the U.S.

The other precious metals tracked higher with gold. Silver jumped 2.25 while platinum and palladium added 0.3% and 1.8%, respectively.

At the Comex close: February gold surged $14.90 to $1,120.20; March silver jumped 31 cents, to $14.56; March palladium added $1.60, to $492.75; and April platinum gained $15.40 to $876.90 an ounce.