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PRECIOUS-Gold at 9-week high as China worries hit stocks, palladium hits lowest since 2010

Published 07/01/2016, 10:12 pm
Updated 07/01/2016, 10:20 pm
© Reuters. PRECIOUS-Gold at 9-week high as China worries hit stocks, palladium hits lowest since 2010
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* Spot gold, U.S. futures climb above $1,100/oz

* European shares tumble, Asian stocks at 3-month low

* China's central bank buys 19t of gold in December (Updates throughout, changes dateline pvs SINGAPORE)

By Clara Denina

LONDON, Jan 7 (Reuters) - Gold climbed above $1,100 an ounce for the first time in nine weeks on Thursday as the dollar fell and investors channelled money into safer assets as worries over the Chinese economy hit global stocks.

European shares fell sharply after China accelerated the depreciation of the yuan, sending Asian shares to a three-month low.

Chinese stocks .CSI300 fell 7 percent on Thursday after less than half an hour of trading, triggering a circuit breaker that suspended trading for the rest of the day.

Spot gold XAU= rose to a nine-week high of $1,102.80 an ounce, before paring some gains to trade up 0.2 percent at $1,095.95 by 1057 GMT. U.S. gold futures also jumped for a fourth straight session to a nine-week high of $1,102.50.

"Gold's strength is probably going to be relatively short term, but there is an upside risk to gold, if the view that China is going to pull the whole world into recession becomes stronger," Citigroup (N:C) metals strategist David Wilson said.

"But if the U.S. and Europe continue to grow, gold will go weaker ... Chinese stock markets had got massively overinflated because a lot of money piled into it and now people come back to reality."

Conversely, palladium XPD= , which as an autocatalyst metal is more exposed to economic weakness, slid to a near-5-1/2-year low of $492.47 an ounce.

Bullion was also supported by a softer dollar and the release of the minutes of the Federal Reserve's last policy meet, assuring markets of gradual rate increases this year. often seen as an alternative investment during times of geopolitical and financial uncertainty, benefited from the risk-averse sentiment in the market along with other haven assets such as the Japanese yen and U.S. Treasuries.

"Gold is clearly re-establishing its role as a safe-haven. For as long as global stock markets - in particular China's - appear wobbly, gold is likely to attract a good bid," HSBC analyst James Steel said.

A raft of data releases from China in coming weeks is likely to show activity continuing to slow, adding to global concerns about the country's economic outlook for 2016. World Bank on Wednesday cut its global economic growth forecast for 2016, citing the weak performance of major emerging market economies. added more gold to its reserves in December, bringing its total purchases in the second half of 2015 to more than 100 tonnes. More purchases by the world's sixth largest official sector gold holder could lend support to prices. other precious metals, silver XAG= fell 0.2 percent to $13.97 an ounce and platinum XPT= dropped 1 percent to $867 an ounce.

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