Gold prices were at their highest level for a week on Wednesday after China’s move to liberalise its bullion market combined with wider risk aversion to boost demand.

The move took the yellow metal back towards $1,200 a troy ounce, just five sessions after it fell to an intraday low of $1,156.9, its weakest reading since late April.

It was bullion’s sixth consecutive session of gains, its longest run higher in two months.

The People’s Bank of China’s decision toincrease the number of institutions allowed to trade bullion internationally was welcomed by analysts, as were moves to encourage exchange-traded products backed by bullion in the country.

“Internationalising the Chinese market may also involve increasing foreign members on the Shanghai Gold Exchange and allow banks to hedge bullion positions,” said Edel Tully, analyst at UBS.

“It reflects a desire to liberalise the gold market and integrate it into China’s financial framework, including foreign exchange. Behind India, China is the second-largest physical consumer. Therefore any step to integrate, liberalise and expand this market should, in time, foster a rising appetite for gold. “

As June’s sharp rally in world equities markets looked increasingly vulnerable to sustained selling, gold’s haven appeal offered further support. It rose 0.9 per cent on the session to $1,195 a troy ounce.

This together with somewhat freeing up their currency might have a big impact.

Regards,

Inca.