Gold Rises Most in Nine Weeks as Physical Demand Climbs

Gold prices continue to advance as demand for coins, bars and jewelry rebounded following the record quarterly plunge. Physical demand in Asia continues to be strong and the focus on Fed tapering is beginning to wane. Yesterday, gold prices rose 2.6%, settling at $1,255.70.

By Debarati Roy & Nicholas Larkin
Jul 1, 2013 11:50 AM MT
Bloomberg

Gold prices advanced the most in nine weeks as demand for coins, bars and jewelry rebounded following the record quarterly plunge. Platinum posted the biggest gain in a year.

In the second quarter, spot gold tumbled 23 percent, the most since at least 1920 after Federal Reserve Chairman Ben S. Bernanke said that the U.S. central bank may scale back debt purchase this this year. The premium for the metal in China rose to $36 an ounce, the highest since April, according to Tim Gardiner, a managing director at TD Securities Inc. in New York.

“Physical demand in Asia continues to be strong,” Carlos Perez-Santalla, a New York-based broker at Marex North America LLC, said in a telephone interview. “The focus on the Fed stimulus and when the tapering may begin has begun to wane.”

Gold futures for August delivery rose 2.6 percent to settle at $1,255.70 at 1:46 p.m. on the Comex in New York, the biggest gain for a most-active contract since April 25. On June 28, the price touched $1,179.40 on June 28, the lowest since Aug. 2, 2010.

Futures have slumped 25 percent this year, wiping out $59.5 billion from the value of exchange-traded products backed by the metal, as some investors lost faith in gold as a store of value.

Production Cost

The price may climb because reducing the stimulus might take longer than some analyst expect, and the price approached the cost of output, according to Macquarie Group Ltd.

Barrick Gold Corp., the world’s biggest gold producer, said on June 28 that it may take a writedown of as much as $5.5 billion on its Pascua-Lama project in the Andes after prices tumbled.

Futures more than doubled from the end of 2008 to a record $1,923.70 in September 2011 as the U.S. central bank led nations in cutting interest rates and buying debt. Bernanke said June 19 that the Fed may reduce its $85 billion of monthly purchases this year and end the program in 2014.

Silver futures for September delivery rose 0.6 percent to $19.578 an ounce on the Comex. On June 28, the price touched $18.17, the lowest since August 2010. This year, the metal has tumbled 35 percent, the most among 24 raw materials in the Standard & Poor’s GSCI Spot Index.

On the New York Mercantile Exchange, platinum futures for October delivery jumped 3.2 percent to $1,382.50 an ounce, the most since June 29, 2012. Last month, the metal dropped 8.3 percent, the fifth straight decline and the longest slump since October 2001.

Palladium futures for September delivery surged 3.9 percent to $686.70 an ounce, the biggest gain since May 28.

To contact the reporters on this story: Debarati Roy in New York at droy5@bloomberg.net; Nicholas Larkin in London at nlarkin1@bloomberg.net

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net

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