Gold Advances Toward Record Amid `Brisk' Demand for Exchange-Traded Funds

Gold advanced toward a record on signs of increased demand from investors seeking to protect their wealth.

Immediate-delivery gold climbed as much as 0.2 percent to $1,247.25 an ounce, and traded at $1,246.75 at 11:43 a.m. in Tokyo. The price touched $1,254.73 yesterday, the highest level since June 28 and within 1 percent of the all-time high.

Bullion has jumped 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. Gold holdings in 10 exchange-traded products tracked by Bloomberg advanced to a record yesterday.

“Demand for gold ETFs has been brisk,” said Hwang Il Doo, a Seoul-based senior trader at KEB Futures Co., predicting gold may test the record. December-delivery futures were little changed at $1,248.50 on the Comex in New York.

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 hold the commodity without taking physical delivery.

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.

Analysts’ Forecasts

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.

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,” Hwang said.

The U.S. Labor Department is scheduled to release jobs data on Sept. 3, with unemployment expected to climb to 9.6 percent this month from 9.5 percent in July, according to the median forecast of more than 70 economists surveyed by Bloomberg News. A report on U.S. factory orders is due for release later today.

Immediate-delivery silver was little changed at $19.35 an ounce, while platinum fell 0.2 percent to 1,532.50 an ounce and palladium dropped 0.5 percent to $516 an ounce.

To contact the reporter on this story: Jae Hur in Tokyo at jhur1@bloomberg.net

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