Spot Gold Gains for Second Day as Equities Drop, Demand Rebounds

Spot gold (XAU) prices advanced for a second day as global equities declined and on signs that physical demand is rebounding. Futures fluctuated before closing lower for the third time in four sessions.

Prices fell to a two-year low yesterday, wiping $560 billion from the value of central bank reserves. Sales from Australia’s Perth Mint surged after prices plunged, Treasurer Nigel Moffatt said. The U.S. mint has sold 122,000 ounces of American Eagle gold coins this month, compared with 62,000 ounces in March. The Standard & Poor’s 500 Index of shares fell as much as 2 percent today on signs of slowing corporate profit.

“People are buying gold after the earnings disappointed and stocks declined,” Adam Klopfenstein, a senior market strategist at Archer Financial Services Inc. in Chicago, said in a telephone interview. “A price drop of this kind has also brought in some physical demand.”

Gold for immediate delivery gained 0.7 percent to $1,377.43 an ounce at 2:10 p.m. in New York. Yesterday, prices touched $1,321.95, the lowest since January 2011, before erasing declines.

Bullion’s 14-day relative strength index was at 22.8, below the level of 30 that indicates to some analysts who study technical charts that a rebound may be imminent.

On the Comex in New York, gold futures for June delivery slid 0.3 percent to settle at $1,382.70, after gaining as much as 0.6 percent and dropping 1.6 percent. Trading was 36 percent higher than the average in the past 100 days for this time of day, according to data compiled by Bloomberg.

Futures slumped 13 percent in the two sessions through April 15, the most in three decades.

India Sales

In India, the largest consumer, the plunge may make bullion more affordable, according to Mehul Choksi, the chief executive officer of Gitanjali Gems Ltd. (GITG), the nation’s biggest retailer of jewelry and diamonds by sales.

Prices have lost 18 percent in 2013 after rising sixfold in a 12-year rally through last year. The metal slipped into a bear market on April 12 on speculation that central banks in Europe may sell holdings to raise funds and that a U.S. recovery would spur the Federal Reserve to rein in stimulus.

“I am not so sure we have seen the bottom, and prices could dip below $1,300 because the mood is still bearish,” Frank Lesh, a trader at FuturePath Trading in Chicago, said in a telephone interview.

Cyprus Finance Minister Haris Georgiades told Bloomberg Television that the country intends to sell part of its bullion reserves, while a decision on the sale needs to be approved by the nation’s central bank. The bank manages the country’s gold holdings of 13.9 metric tons, according to the World Gold Council.

Silver for immediate delivery fell 0.5 percent to $23.28 an ounce. The price dropped to $22.0713 yesterday, the lowest since October 2010.

On the New York Mercantile Exchange, platinum futures for July delivery slid 1 percent to settle at $1,435.40 an ounce. Palladium futures for June delivery fell 2.5 percent to $661.40 an ounce.

To contact the reporters on this story: John Deane in London at jdeane3@bloomberg.net 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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