Investors’ rush to gold, bonds, an overreaction to temporary problems – by Ian McGugan (Globe and Mail – February 9, 2016)

Growing fears of a new financial crisis are driving a stampede to safety by investors spooked about what lies ahead for the global economy.

Stock markets around the world tumbled Monday as money poured into what people perceive as safe assets – primarily government bonds and gold. The hardest-hit stocks were those of global banks, the companies most vulnerable if world growth were to abruptly slow and asset prices were to sour.

Meanwhile, gold jumped, touching $1,200 (U.S.) an ounce for the first time since June, and the yield on Canada’s benchmark 10-year government bond fell to its lowest level on record as investors sought havens from the economic storm. A cluster of concerns has combined to chase people out of riskier assets.

The biggest source of anxiety is slowing Chinese growth, which has cast a pall over hopes for global expansion and helped to drag down commodity prices. As prices for oil and other raw materials have tumbled, concerns have grown that banks could suffer losses on their loans to commodity producers.

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