Gold Gains Third Time in Four Days on Increased Physical Demand

Gold futures advanced for the third time in four days on signs of increasing physical purchases.

Tanaka Kikinzoku Kogyo K.K., Japan’s biggest gold retailer, said today its sales rose threefold in the second quarter from the previous three months, as lower prices attracted consumers. There are signs of firming demand from China to Japan, Barclays Plc wrote in a July 15 report. Prices rebounded 9 percent since reaching a 34-month low on June 28 as the decline spurred more buying of coins, bars and jewelry.

“Physical demand is keeping the gold market alive,” Sterling Smith, a Chicago-based commodity futures specialist at Citigroup Inc., said in a telephone interview. “We also saw some technical buying come in.”

Gold futures for December delivery rose 0.5 percent to settle at $1,285.50 an ounce at 1:40 p.m. on the Comex in New York. The metal touched $1,301.10 yesterday, the highest since June 21, before erasing gains.

Bullion has tumbled 23 percent this year as some investors lost faith in the commodity as a store of value amid an equity rally and muted inflation.

“One reason gold prices are lower is people are less concerned about extreme outcomes, particularly negative outcomes, and therefore they feel less need for whatever protection gold affords,” Federal Reserve Chairman Ben S. Bernanke said during under questioning from the Senate Banking Committee. “A lot of people hold gold as an inflation hedge, but the movements of gold don’t predict inflation very well, actually.”

On the New York Mercantile Exchange, platinum futures for October delivery added 0.3 percent to $1,414.80 an ounce. In the spot market, one ounce of platinum bought as much as 1.1118 ounces of gold, the most since August 2011.

Silver futures for September delivery fell 0.2 percent to $19.389 an ounce on the Comex. Palladium futures for September delivery jumped 1.6 percent to $747.50 an ounce on the Nymex, the biggest gain in more than a week.

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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