Gold Rises as Consumer-Price Outlook Boosts Bets on Fed Stimulus

Gold advanced after a U.S. report showing stagnant consumer prices bolstered prospects that the Federal Reserve will take further steps to spur growth, reviving inflation and demand for the metal as a hedge.

Consumer prices were unchanged in July and are up 1.4 percent over the past 12 months, the smallest year-to-year increase since November 2010, the Labor Department reported today. Gold has dropped 6.1 percent since the end of February as the Fed failed to announce any new easing measures besides extending its program in June of replacing short-term bonds with longer-term debt by $267 billion through the end of 2012.

“The CPI numbers have removed one roadblock in the path of some announcement on the easing front,” David Meger, the director of metal trading at Vision Financial Markets in Chicago, said in a telephone interview.

Gold futures for December delivery advanced 0.3 percent to settle at $1,606.60 an ounce at 1:39 p.m. on the Comex in New York. Prices have risen 2.5 percent this year.

Bullion gained 0.8 percent last week amid speculation that China, the U.S. and Europe may take more steps to boost economic growth, reviving demand for gold as an inflation hedge.

The metal surged 70 percent from the end of December 2008 to June 2011 as the Fed kept borrowing costs at a record low and bought $2.3 trillion of debt in two rounds of so-called quantitative easing.

SPDR Investment

Soros Fund Management more than doubled its investment in the SPDR Gold Trust (GLD), an exchange-traded product backed by bullion, to 884,400 shares as of June 30, compared with three months earlier, a U.S. Securities and Exchange Commission filing showed yesterday. Paulson & Co., which owns the biggest stake in SPDR, increased its holdings by 26 percent to 21.8 million shares, a filing showed. Global holdings in bullion-backed ETPs reached a record 2,417.3 metric tons on Aug. 10, data compiled by Bloomberg show.

Silver futures for December delivery rose 0.2 percent to $27.896 an ounce on the Comex.

On the New York Mercantile Exchange, platinum futures for October delivery fell 0.2 percent to $1,396.20 an ounce. Palladium futures for September delivery slipped 0.1 percent to $578.05 an ounce.

To contact the reporter on this story: Debarati Roy in New York at droy5@bloomberg.net

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net

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