LONDON, 28 December 2007 — Gold and oil prices as well as government bonds rose while US stock futures fell yesterday after news Pakistani opposition leader Benazir Bhutto was killed in a gun and bomb attack after a rally in the city of Rawalpindi.
The price of gold hit a one-month peak yesterday as traders reacted to the assassination. The precious metal is widely regarded as a safe investment in times of geopolitical uncertainty.
On the London Bullion Market, gold prices climbed to $830.41 per ounce — which was last seen on Nov. 26. Gold has gained about 30 percent this year.
That compared with about $825 per ounce before news of Bhutto’s death.
In Hong Kong, gold prices closed markedly higher yesterday at $823.80-824.30 an ounce, up from Monday’s close of $809.50-810.00. It opened at $821.70-822.20. The gold market was closed on Tuesday and Wednesday for the Christmas holidays.
Analysts said the shock of the Bhutto news triggered a classic capital flight to assets which are considered as safe havens in times of geopolitical stress.
“(Bhutto) is just a concern. The move to gold is the flight to safety and quality on the headlines on a quiet illiquid day,” said Camilla Sutton, currency strategist at Scotia Capital in Toronto.
US government bond prices were up 78 ticks for a yield of 4.1872 percent. Euro zone government bond prices also rose after the Bhutto news and US data, paring earlier losses to standing slightly down on the day.
Oil rose more than a dollar yesterday after news of Bhutto’s death, which unnerved financial markets.
US light sweet crude for February was $1.33 cents up at $97.30 a barrel by 1601 GMT. London Brent crude rose $1.25 cents to $95.19 a barrel. US crude oil stocks fell to their lowest since January 2005 last week, according to the US Energy Information Administration.
Crude oil inventories fell 3.3 million barrels, which was more than the 1 million barrel fall forecast by analysts.
“Numbers looking bullish with crude stocks falling about 2 million barrels more than expected,” said Jim Ritterbusch, president of Ritterbusch & Associates.
“Pakistan is a crucial country in the region and prospects for political uncertainty are leading to some nervousness (which is reflected in) gold, bond and oil prices rising and the dollar dipping,” said Audrey Childe-Freeman, European economist at CIBC bank in London.
Oil had surged to one-month highs in the previous session following Turkey’s raid on Kurdish guerrilla targets in northern Iraq.
“The next few days are going to remain quite thin and choppy, but it certainly looks as if the market is firm and the firmness is here to stay,” said James Moore, precious metals analyst at TheBullionDesk.com.
“The dollar is on a back footing and we have seen investor inflows into gold. People are looking to diversify their accounts. Certainly gold remains bullish looking into 2008.”
Safe-haven buying in gold intensified in the previous session after Turkish warplanes bombed Kurdish guerrilla targets in northern Iraq.
