Gold Rises Above $1,300 to 1-Month High on Stimulus Outlook, Oil

Gold advanced above $1,300 an ounce to a one-month high on speculation the Federal Reserve will maintain stimulus and rising oil prices. Gold has slid 21 percent so far this year after investors lost faith in the metal as a store of value. Recent comments from Bernanke caused gold to climb 1.3 percent last week.

By Nicholas Larkin & Glenys Sim
Jul 22, 2013 5:03 AM MT
Bloomberg

Gold advanced above $1,300 an ounce to a one-month high in New York as speculation the Federal Reserve will maintain stimulus and rising oil prices spurred demand for the metal.

Bullion futures rose 1.3 percent last week, capping the first back-to-back weekly gains since May, after Fed Chairman Ben S. Bernanke indicated that it’s too early to decide whether to begin scaling back bond purchases in September. Crude oil in New York reached the highest since March 2012 on July 19.

Gold slid 21 percent this year, wiping $58.1 billion from the value of gold exchange-traded product holdings, after some investors lost faith in the metal as a store of value. The Bloomberg Dollar Index, which tracks the greenback against 10 major currencies, traded near a three-week low as Pacific Investment Management Co. fund manager Bill Gross said he expected the Fed won’t tighten policy before 2016.

“Recent comments from the Fed Chairman eased worries about the Fed’s asset-purchase program and this resulted in some short covering,” Mumbai-based Kotak Commodity Services Ltd. said today in a report. The “outlook for U.S. economy and the Fed’s monetary policy stance will be key price-determining factors. Gold also gained support from firmness in crude.”

Gold for December delivery rose 1.7 percent to $1,316.60 an ounce by 7:49 a.m. on the Comex in New York. Prices reached $1,325, the highest since June 20. Futures trading volume was 8 percent above the average for the past 100 days for this time of day, according to data compiled by Bloomberg. Gold for immediate delivery in London gained 1.6 percent to $1,316.79.

ETP Holdings

Gold ETP holdings fell 2.9 metric tons to 1,976 tons on July 19, the lowest since May 2010, data compiled by Bloomberg show. The 10.2 tons sold last week was the least since May.

Hedge funds and other large speculators increased their net-long position by 56 percent to 55,535 contracts by July 16, the highest since June 4, U.S. Commodity Futures Trading Commission data show. Short contracts fell the most since November after reaching a record the previous week. Sixty-seven percent of IG Group Holdings Plc (IGG)’s clients with open positions in gold expect price gains, the company said today in an e-mailed report.

Bullion rose above 1,000 euros ($1,318) an ounce for the first time since June 20. Crude oil futures gained 18 percent in New York this year. Some investors judge that higher oil prices stoke inflation and buy gold as a hedge.

“As oil prices rise, especially in the U.S., inflation, which hasn’t been an issue and a reason gold is lower this year, may start to pick up,” Lv Jie, an analyst at Cinda Futures Co., said by phone from Hangzhou.

Silver for September delivery gained 2.3 percent to $19.915 an ounce in New York. An ounce of gold bought as many as 66.6 ounces of silver on July 19 in London, the most since August 2010, data compiled by Bloomberg show.

Palladium for September delivery added 0.2 percent to $751.05 an ounce, after reaching $753, the highest since June 13. Platinum for October delivery climbed as much as 0.8 percent to $1,443.20 an ounce, the highest since June 19, and was last at $1,441.90.

To contact the reporters on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net; Glenys Sim in Singapore at gsim4@bloomberg.net

To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net

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