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RPT-GLOBAL MARKETS-Gold at record; resource plays boost stocks

Published 11/22/2009, 10:14 PM
Updated 11/22/2009, 10:15 PM
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* Gold at record above $1,160 on safe-haven bid

* Asian stocks firmer, led by Australian resource stocks

* Oil, copper boosted by supply worries (Repeats to more subscribers)

By Lincoln Feast

SINGAPORE, Nov 23 (Reuters) - Gold rose more than 1 percent to a record high on Monday as concerns about accelerating inflation and weak economic growth prompted investors to seek relatively safer assets, while supply concerns boosted oil and copper.

Asian stocks also rose, led by gains in Australia thanks to higher resource stocks, although volumes were light with Japan out on holiday.

Many investors have been reducing their positions and cutting risk as a strong year begins to wind down and with economic indicators still showing scant evidence of a sustained recovery.

Highlighting the growing concerns evident in the market, yields on U.S. 2-year Treasuries have fallen below 0.75 percent, approaching levels seen at the height of the financial crisis in December last year.

"It worries me that two-year yields are trading as they are plus (short-dated) bill rates went negative and gold is bid, bid, bid," said Robert Rennie, chief currency strategist at Westpac.

"It makes me think there is a huge flight to quality going on that hasn't hit FX yet...perhaps a bit of a warning sign."

The dollar, which often rises in times of increased uncertainty and worries about global growth, gave up early gains against a basket of currencies <.DXY>, while the commodity-linked Australian dollar benefited from the strong gold price.

Spot gold was trading around $1,162 an ounce, having hit a peak around $1,163, up a third so far this year.

Helped by the safe haven bid and purchases by a number of central banks, gold has surged since the start of November, hitting nine record highs and gaining 11 percent in the past three weeks.

STOCKS STALLED

The heightened sense of caution has stalled a rally in global stocks, which have traded in a broad range since mid-October.

After falling last week, MSCI's index of Asia-Pacific stocks outside of Japan <.MSCIAPJ> rose 0.7 percent, taking its gains so far this year to almost two-thirds.

Japanese markets were closed for a holiday.

Australian shares <.AXJO> rose 0.6 percent, with shares of Drillsearch Energy Ltd jumping more than 19 percent after the company reported a promising oil find.

Crude oil futures rose 1 percent to $78.24 a barrel, supported by heightened tensions between Iran and Western nations which raised speculation of a potential supply risk. [O/R]

Iran's armed forces launched large-scale air defence war games on Sunday to show off the country's deterrence capabilities in the face of pressure from the West over its nuclear programme, and a cleric in the Revolutionary Guards warned that the Islamic Republic would fire missiles at "the heart of Tel Aviv" if attacked. [ID:nHAF237455] [ID:nDAH128498]

"There's always a supply risk premium that can arise from these elevated tensions in the Middle East and that is a factor pushing up oil prices this morning," said Toby Hassall, a commodities analyst at the Commonwealth Bank of Australia.

Supply concerns also supported copper , which was testing $7,000 a tonne amid strikes by workers in Chilean mines. (To read Reuters Global Investing Blog click on http://blogs.reuters.com/globalinvesting; for the MacroScope Blog click on http://blogs.reuters.com/macroscope; for Hedge Fund Blog Hub click on http://blogs.reuters.com/hedgehub) ((For the state of play of Asian stock markets please click on: <0#.INDEXA>)) (Editing by Kim Coghill) ((lincoln.feast@reuters.com; +65 6870 3832; Reuters Messaging: lincoln.feast.reuters.com@reuters.net))

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