Gold price tops $US1300

Gold stocks have surged in afternoon trade, in tandem with the rising price of yellow metal.

Gold stocks to resume their upward trend after a horror day yesterday. Picture: The Australian/Renee Nowytarger

The price of gold has struck through a key psychological mark to touch its highest level in almost two years.

The rise came against a backdrop of increasing haven demand over concerns about the possibility of a UK exit from the European Union and the US Federal Reserve’s scaling-back of projections for raising interest rates.

The price of spot gold touched an intraday high of $US1,313.51 a troy ounce -- its highest level since August 2014 -- after having crossed the $US1,300 psychological threshold earlier in the day.

And it has spurred gold stocks to resume their upward trend after a horror day yesterday, making the sector a rare positive story through a challenging week of trade.

By the close of trade, local giant Newcrest had surged 2.92 per cent to $22.54, while Regis Resources bounded 1.76 per cent to $3.46 and Northern Star soared 5.17 per cent to $5.09.

Market uncertainty about next week’s referendum in the UK on its membership in the EU pushed gold higher, as traditionally the precious metal is viewed as a store of value during periods of increased risk. The prospect of a British exit from the EU, or “Brexit,” is negative for other commodities, including industrial metals, because such an action could hurt their demand.

The rally in gold is predicted to be sustained in the near term amid market expectations that the precious metal could hit $US1,400 a troy ounce this year. The gains have been fueled mostly by Western investment demand, but physical demand for gold in the world’s largest consumer, China, is seen as stable as the yuan depreciates. This is because of gold’s reputation as a value-retaining alternative currency in uncertain times.

Analysts, however, said that gold could face a possible near-term headwind if the Fed were to change course and increase interest rates in coming months.

The gains came after the US Fed struck a dovish tone overnight, with the prospect of a lower rates trajectory aiding interest in gold, which offers no yield to investors.

With Dow Jones newswires