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Gold Advances on Investment Purchases, May `Struggle' to Reach Record High
Gold gained in London on signs of increased demand from investors seeking to protect their wealth.
The price for immediate-delivery bullion touched $1,254.73 an ounce yesterday, the highest level since June 28 and within 1 percent of the all-time high. Gold holdings in 10 exchange- traded products tracked by Bloomberg advanced yesterday to a record.
“Gold’s going to struggle at this level,” David Thurtell, an analyst at Citigroup Inc. in London, said today by phone. “It’s the most technically traded commodity in the world. People look at the current record level and try to sell just below that.”
Gold climbed as much as $5.35, or 0.4 percent, to $1,249.65 an ounce, and traded at $1,246.40 at 11:36 a.m. London time. December-delivery futures added 10 cents at $1,248.20 on the Comex in New York.
Bullion has jumped almost 14 percent this year, reaching a record $1,265.30 on June 21. The price is poised for a 10th annual gain on concern that the economic recovery may slow, hurting currencies and equities. The U.S. Dollar Index, a gauge of the greenback against six other monies, rose as much as 0.1 percent and dropped 0.2 percent as of 12:07 p.m. London time.
In the second quarter, investors purchased 291.3 metric tons in exchange-traded funds, boosting demand by 36 percent, according to the producer-funded World Gold Council. Gold ETFs are backed by the metal and trade like shares, allowing investors to hold the commodity without taking physical delivery.
U.S. Data in Focus
Holdings in the SPDR Gold Trust, the biggest ETF backed by bullion, rose for a second day to 1,304.03 tons yesterday, according to figures on the company’s website. Holdings touched a record 1,320.44 tons in June.
Bullion rose to $1,247.75 an ounce in the morning “fixing” in London, used by some mining companies to sell output, from $1,246.50 at the afternoon fixing yesterday.
The European Central Bank announces its decision on interest rates at 12:45 p.m. London time. The current record-low rate of 1 percent is “bullish for gold as the opportunity costs, the lack of yield, of owning gold is negligible,” analysts at Dublin-based broker Goldcore Ltd. wrote in a report today.
Analysts raised their 2011 gold forecasts more than for any other precious metal in the past two months, according to data compiled by Bloomberg. Gold may rise to as high as $1,500 next year, according to the median in a Bloomberg survey of 29 analysts, traders and investors.
‘Still Concerned’
Bullion reversed early gains yesterday to lose 0.3 percent after a report that showed faster-than-estimated growth in U.S. manufacturing boosted confidence in the recovery. Manufacturing in China also grew at a faster pace in August, according to data issued yesterday.
“Although there’s positive data from the U.S. yesterday, some investors are still concerned that some data later this week may show the economy is slowing,” said Hwang Il Doo, a Seoul-based senior trader at KEB Futures Co. “Demand for gold ETFs has been brisk.”
The U.S. Labor Department is scheduled to release jobs data tomorrow, with unemployment expected to climb to 9.6 percent last month from 9.5 percent in July, according to the median forecast of more than 70 economists surveyed by Bloomberg News. Reports on U.S. factory orders and pending home sales are due for release at 3 p.m. London time today.
Precious commodities including gold are set for a “subdued” second half because of a lack of “systemic risk,” Citigroup Inc. analyst Jon Bergtheil wrote in a report today.
Citigroup economists forecast slow growth without systemic risk, “which suggests there will once more be a level playing field between base metals and precious commodities,” according to Bergtheil.
Immediate-delivery silver rose 0.4 percent at $19.43 an ounce, while platinum increased 0.4 percent to $1,540.20 an ounce and palladium was little changed at $519.25 an ounce.
To contact the reporters on this story: Chanyaporn Chanjaroen in London at cchanjaroen@bloomberg.net; Jae Hur in Tokyo at jhur1@bloomberg.net.
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