Gold Fluctuates in London as Third Weekly Drop in a Row Spurs Purchases

Gold may rise above $1,200 an ounce in New York on speculation the metal’s third consecutive weekly drop will prompt some investors to increase holdings.

European Central Bank President Jean-Claude Trichet said indicators suggested economic activity in the region was strengthening. The dollar was up 0.4 percent against the euro after earlier trading at an eight-week low and European equities rose for a fourth day. Gold fell to a six-week low of $1,185 on July 7 and a third weekly drop would be the worst run since the beginning of February.

“Buyers have taken the opportunity to buy upon dips,” Suki Cooper, a Barclays Capital analyst in London, said in a report. “We do expect continued investor interest in gold to drive prices higher as the year unfolds.”

Gold futures for August delivery rose $4.30, or 0.4 percent, to $1,200.40 an ounce at 8:06 a.m. on the Comex in New York. Prices fell 0.6 percent this week. Gold for immediate delivery was 0.2 percent higher for today at $1,200.20.

Bullion rose to $1,196.25 an ounce in the morning “fixing” in London, used by some mining companies to sell output, from $1,193.50 at yesterday’s afternoon fixing.

Gold futures have lost 5.2 percent since reaching a record $1,266.50 an ounce on June 21, limiting this year’s advance to 9.5 percent. The metal gained this year as investors sought to protect their wealth from prolonged financial turbulence in Europe and on concern the global recovery may slow.

Buying on Dips

“Indicators suggest that a strengthening in economic activity took place during the spring,” Trichet said at a news conference in Frankfurt yesterday. The ECB’s main interest rate, which it left unchanged at 1 percent, is at an “appropriate” level, and inflation expectations “remain firmly anchored,” he said.

Assets in the SPDR Gold Trust, the biggest exchange-traded fund backed by bullion, fell 0.45 metric ton to 1,316.04 tons yesterday, according to the company’s website. Global holdings of the metal by ETFs were little changed at 2,072.55 tons yesterday, according to Bloomberg data from 10 providers.

Thirteen of 20 traders, investors and analysts surveyed by Bloomberg, or 65 percent, said bullion will climb next week. Four forecast lower prices and three were neutral.

“Investors are likely to continue buying gold on dips below $1,200 and this may provide some support for gold prices,” said Ong Yi Ling, Singapore-based analyst with Phillip Futures Pte Ltd. “Our support for gold continues to be pegged at the $1,185 level and hence downside risks appear to be capped.”

Silver for September delivery in New York increased 0.9 percent to $18.025 an ounce. Platinum for October delivery added 0.7 percent to $1,526.60 an ounce. Palladium for September delivery gained 1.7 percent to $452 an ounce.

To contact the reporter on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net; Kyoungwha Kim in Singapore at Kkim19@bloomberg.net.

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