Gold price surges to highest level since June as share prices slide

New York/London: The price of gold jumped 2 percent to a 7-1/2-month high on Monday, briefly nudging above the psychological level of $1,200 an ounce, as sliding stock markets and worries over global economic growth prompted investors to seek safety.

Stock indexes worldwide tumbled on persisting fears of a global economic slowdown, while benchmark 10-year Treasury yields hit their lowest in a year on demand for assets deemed less risky, such as bullion.

Spot gold reached a peak of $1,200.60 an ounce, its strongest since June 22, after breaking key resistance at its October high at $1,190.63. At 3:02 p.m. EST (2002 GMT) it was up 1.8 percent at $1,194 an ounce.

"The drive for gold today is purely tied to the risk type of trade," said Eli Tesfaye, senior market strategist for brokerage RJO Futures in Chicago, pegging the next target level at $1,210.

"People have to move their equities out of there, have to put (money) into safer assets."

U.S. gold for April delivery settled up 3.5 percent at $1,197.90 an ounce.

Also adding to the positive sentiment was continued strong inflows into gold-backed exchange-traded funds (ETF). On Friday, SPDR Gold Trust , the world`s largest gold-backed ETF, said its holdings rose 0.7 percent to 698.46 tonnes.

"We are seeing non-stop buying from the investment community and little selling of note," one trader said, adding that ETFs and other investment funds were moving into gold as a safe haven.

Traders said gold`s 5 percent gain last week, its biggest weekly rise since July 2013, had also made many investors more convinced that the metal`s rally since the start of this year was sustainable.

Some recent weak economic data, particularly from the United States and China, has led financial markets to expect there will be fewer U.S. rate hikes this year than the four they had been pricing in a few weeks ago, perhaps only one.

Lower rates cut the opportunity cost of holding gold, which earns no yield but costs to store and insure.

Hedge funds and money managers boosted their bullish bet in COMEX gold to a three-month high in the week to Feb. 2, data showed on Friday.

Other precious metals tracked gold higher. Platinum was up 2.2 percent at $926.98, after reaching $931.76, its highest since Nov. 9. Silver jumped 2.8 percent to $15.39 an ounce, after briefly touching $15.46, its highest since Nov. 3.

Palladium was up 2.9 percent at $515.20 an ounce.