Gold Advances as Physical Demand Boosts Prices; Silver, Palladium Climb

Gold rose as two weeks of declines attracted buying from physical users and investors, with holdings in exchange-traded products backed by the metal gaining to an all-time high. Silver also increased.

Immediate-delivery bullion gained 0.8 percent to $1,386.30 an ounce at 3:33 p.m. in Singapore. The price lost 0.8 percent last week following a 2 percent drop the week before. The February-delivery contract rose 0.5 percent to $1,385.80 an ounce on the Comex in New York.

“Physical demand has put a floor” under prices, Chen Xin Yi, an analyst at Barclays Capital in Singapore, said by phone today. “Buyers realized that prices are not going to correct very much. Investors’ demand is also stable.”

Gold assets in exchange-traded products, or ETPs, climbed 0.7 percent to a record 2,113.2 metric tons as of Dec. 17, according to data collected by Bloomberg from 10 providers. Holdings have climbed 17.6 percent this year.

The metal has gained 26 percent this year, set for a 10th annual gain, as a sovereign-debt crisis in Europe and so-called quantitative easing in the U.S. hurt currencies and aided demand. The price reached a record $1,431.25 an ounce on Dec. 7.

Gold may also be boosted by developments on the Korean peninsula and the euro-zone debt crisis, Ben Westmore, an analyst at National Australia Bank Ltd. in Melbourne, said today by phone. South Korea proceeded with a live-firing drill that has promoted North Korean threats of retaliation as the United Nations’ Security Council failed to ease tension between the two.

Commission Data

Hedge-fund managers and other large speculators cut their net-long position in New York futures 5 percent to 220,195 contracts in the week to Dec. 14, according to the U.S. Commodity Futures Trading Commission data. That’s the lowest level since the week ended Aug. 17.

Baker Steel Capital Managers LLP, a London-based firm managing about $1.7 billion, plans a new gold fund to be backed by the metal and shares of producers worldwide, according to Managing Partner David Baker. The firm’s existing Baker Steel Gold Fund climbed 44 percent in the first 11 months.

“Gold isn’t in a bubble,” said Sydney-based Baker, who founded Baker Steel Capital in 2001. “We’re not finding enough to grow supply. We’re having to go to more marginal projects and third-world countries where there are more risks.”

Investors speculated today European nations will struggle to raise funds to plug holes from sovereign debts, driving the euro lower against the dollar. Moody’s Investors Service last week cut Ireland’s credit rating and said it may lower Spain’s.

Silver for immediate delivery climbed 0.6 percent to $29.3188 an ounce. Silver holdings in ETPs remained unchanged for a second straight day at 15,172.49 tons as of Dec. 17.

Spot palladium added 0.4 percent to $742.50 and immediate- delivery platinum increased 0.2 percent at $1,703.50 an ounce.

To contact the reporter on this story: Chanyaporn Chanjaroen in London at cchanjaroen@bloomberg.net

To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net

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