Gold Approaches Seven-Month High as Data Back Case for Stimulus

Gold climbed toward the highest in almost seven months as economic data that trailed estimates supported the case for more stimulus by central banks around the world, increasing demand for the metal as a store of value.

Spot gold rose 0.2 percent to $1,771.35 an ounce at 9:51 a.m. in Singapore, after ending Sept. 14 at $1,770.40. An advance this week would be the fifth and the longest such run since August 2011. Bullion reached $1,779.50 on Sept. 19, the highest price since Feb. 29. Holdings in gold-backed exchange- traded products expanded to a record 2,523.671 metric tons yesterday and have risen 7.1 percent this year.

Data yesterday showed more Americans than forecast filed claims for unemployment benefits and an index of U.S. leading indicators fell for a second time in three months, while a euro- area services and output gauge dropped to a 39-month low in September. Japan’s exports declined in August and a Chinese manufacturing survey pointed to an 11th month of contraction.

“We’ll get some consolidation on the way towards breaking through the $1,780 to $1,800 resistance zone, but we expect gold to get there eventually, especially if economic data doesn’t show signs of improvement and central banks have to take more steps to support growth,” Wang Xiaoli, chief investment strategist at CITICS Futures Co., a unit of China’s biggest listed brokerage, said from Shenzhen. “The uptrend in ETFs is very encouraging and is reflective of more investors wanting to own gold to hedge against inflation and macroeconomic risks.”

Monetary Stimulus

The Bank of Japan (8301) said this week it will add 10 trillion yen ($128 billion) to a fund that buys assets, following the U.S. Federal Reserve’s announcement last week of a third round of stimulus. China approved infrastructure plans and the European Central Bank this month gave details of a program to buy the debt of member states, after President Mario Draghi pledged on July 26 to do whatever it takes to preserve the euro. Since then, gold has risen 9.7 percent and the euro has climbed 5.7 percent against the dollar.

December-delivery gold rose as much as 0.3 percent to $1,775.60 an ounce on the Comex, and was last at $1,773.70. The contract climbed to a 29-week high of $1,781.80 on Sept. 19. Fifteen of 29 analysts surveyed by Bloomberg expect prices to rise next week and seven were bearish. A further seven were neutral, extending the overall bullish outlook for an 18th week.

In China, spot gold of 99.99 percent purity gained 0.5 percent to 359.11 yuan a gram ($1,771.58 an ounce) on the Shanghai Gold Exchange. Volumes for the benchmark contract on the country’s largest cash bullion market almost doubled to 6,132 kilograms yesterday, from 3,309 kilograms on Sept. 19.

Spot platinum rose as much as 1.1 percent to $1,645.25 an ounce, before trading at $1,640.25. The metal is 4 percent lower this week and set for the first such drop in three weeks, after a labor dispute was resolved in South Africa, the world’s largest producer, easing the threat to supplies.

Cash silver gained 0.2 percent to $34.75 an ounce, after swinging between gains and losses. Palladium added as much as 0.8 percent to $667.50 an ounce, and was last at $666, down 4.4 percent this week.

To contact the reporter on this story: Glenys Sim in Singapore at gsim4@bloomberg.net

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

Bloomberg reserves the right to edit or remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.