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Market report: Gold climbs higher in risk-off market

LaToya Harding
Gold

A risk-off mood on global markets lifted the price of gold to more than $1,800 (£1,426) an ounce for the first time since September 2011.

The precious metal – seen as a safe haven – has been on a steady upwards trajectory over recent months against a backdrop of economic turmoil and concerns that inflation may rise in the near future. A softer US dollar also assisted the metal on Wednesday.

Bjarne Schieldrop, chief commodities analyst at Swedish bank SEB, said gold could test an all-time high of $1,920 an ounce if the trend continued.

“Governments all around the world will now spend money they don’t have, and interest rates will stay close to zero and real rates will likely be negative for an extended period,” he said. “These are all very bullish ingredients for the gold price.”

It came as equity markets in Europe closed in the red, with London performing slightly better than its counterparts in the bloc.

The FTSE 100 closed 0.6pc lower at 6,156.2 while the domestically focused FTSE 250 fell 0.95pc to 17,185.2 as the Chancellor’s summer statement failed to excite traders. The government assistance provided to the hospitality and housing sectors seemed to have little affect on shares, with leisure companies and housebuilders ending the day flat.

Markets Hub I Gold AM/PM Fixing

Persimmon climbed 21p to £24.33 and Barratt Developments slipped 6.4p to 522p. Meanwhile, Restaurant Group, which initially jumped on the back of the news, closed 2.4p down at 55.9p, a fall of 4pc.

Elsewhere, water company Pennon edged 9p higher to £10.77 after it announced it had completed the disposal of its waste management group Viridor, netting £3.7bn in cash.

The FTSE 100 company said it had realised “significant strategic value” from the sale, adding it “will now focus on its sector-leading water and wastewater businesses, whilst considering further growth opportunities that create value for customers, employees and shareholders”. It plans to use the funds to cut down its debt pile from £1.2bn to £300m in the coming months, make returns to shareholders and also fund growth opportunities that may arise.

Alongside the announcement, Pennon said the end of its strategic review was a “natural point” for leadership change, announcing the appointment of current chief financial officer Susan Davy as chief executive.

When she takes up the role at the end of July, she will become the FTSE 100’s eighth current female chief executive – equal to the previous high. Its shares rose 9p to £10.77.

There were few notable moves on the FTSE 250 on Wednesday. Software group Micro Focus underwent a dead cat bounce, rising 10.6p to 363.4p following Tuesday’s near-20pc losses.

The biggest mid-cap faller was FirstGroup, which plunged more than a fifth, or 11.3p to 37.8p, after the transport group flagged a “material uncertainty” over its ability to continue as a going concern due to risks around the pandemic.