Gold May Gain as Speculation on Pace of Fed’s Tightening Increases Demand

Gold may gain in New York as speculation the Federal Reserve won’t start tightening monetary policy soon spurs demand for the metal.

Fed Bank of Chicago President Charles Evans yesterday said improvements in the economy, labor market and the outlook for inflation aren’t sufficient for the central bank to begin reducing its record monetary stimulus. Gold pared some of its gains after the dollar climbed against six major currencies. Gold typically moves counter to the greenback, which earlier today fell to a one-week low.

Recent economic data may allow “policy makers some time before turning hawkish and admitting future liquidity curbs,” Andrey Kryuchenkov, an analyst at VTB Capital in London, said today in a report. “This means limited downside in gold.”

Gold for June delivery rose $2.70, or 0.2 percent, to $1,495.10 an ounce by 7:59 a.m. on the Comex in New York. Prices earlier gained as much as 0.8 percent and are little changed this week. Immediate-delivery gold was 0.2 percent higher at $1,495.60 in London.

Twelve of 19 traders, investors and analysts surveyed by Bloomberg, or 63 percent, said bullion will rise next week. Three predicted lower prices and four were neutral.

Concern about faster inflation, Europe’s debt crisis, a weakening dollar and fighting in Libya boosted gold to a record $1,577.40 on May 2. Prices are up 5.2 percent in 2011 after climbing the past 10 years, the longest run of gains in at least nine decades in London.

Gold Prices

This week, gold prices “held in U.S. dollar terms; it has held in euro, yen and sterling terms and we are impressed by that holding,” said Dennis Gartman, an economist and the editor of the Suffolk, Virginia-based Gartman Letter. He said he’s adding to his gold positions.

Prime Minister George Papandreou is finalizing the fifth round of deficit cuts to comply with an international bailout as economists, including Nouriel Roubini, say he’ll fail to prevent Greece from becoming the first country to restructure its debt in the euro region.

“U.S. dollar weakness and uncertainty surrounding Greece’s debt situation were supports,” Mark Pervan, head of commodity research with ANZ Banking Group Ltd., wrote in a note today.

Silver for July delivery fell 0.1 percent to $34.885 an ounce in New York. Palladium for June delivery was up 0.1 percent at $729 an ounce. Platinum for July delivery was little changed at $1,769.60 an ounce.

To contact the reporters on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net

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

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