Gold Rises to One-Week High as Fed Maintains Stimulus

Gold rose to a one-week high in London after the Federal Reserve maintained the pace of U.S. bond purchases, boosting demand for the metal as a store of value. Silver and palladium advanced.

The Federal Open Market Committee said it will “await more evidence” for sustained economic recovery before reducing its $85 billion in monthly stimulus. Gold has dropped 18 percent this year on speculation that the Fed would taper debt purchases that helped the metal cap a 12-year bull run in 2012.

“This came as a complete surprise to many market participants and we are seeing prices move higher,” David Meger, the director of metal trading at Vision Financial Markets in Chicago, said in a telephone interview. “The trend is bullish.”

Gold for immediate delivery rose 0.2 percent to settle at $1,366.36 an ounce at 4:59 p.m. in New York. Earlier, the price reached $1,375.81, the highest since Sept. 10. Yesterday, the metal surged 4.1 percent, the most in 15 months.

On the Comex in New York, gold futures for December delivery rose 4.7 percent to close at $1,369.30, the biggest gain since March 19, 2009. Yesterday, the price settled 0.1 percent lower before the Fed announcement.

Goldman Outlook

Goldman Sachs Group Inc. said the Fed’s decision “leaves risks to gold prices as skewed to the upside in the near term.” The bank affirmed its forecast that prices will resume a drop into 2014 on U.S. economic growth and less accommodative monetary policy, analysts Damien Courvalin and Jeffrey Currie said in a note dated yesterday.

Analysts were divided on the amount by which policy makers would scale back monthly asset purchases. Among 64 economists surveyed by Bloomberg News before the announcement, 33 predicted the Fed would reduce buying of Treasuries by $5 billion or less, while 31 forecast a cut of $10 billion or more.

Spot gold, which reached a record $1,921.15 on Sept. 6, 2011, surged 70 percent from the end of December 2008 to June 2011 as the Fed pumped more than $2 trillion into the financial system by purchasing debt. The price fell 14 percent in two days through April 15, the biggest drop since 1983, as some investors lost faith in the metal as a store of value. The rout spurred coin and jewelry demand from the U.S. to China.

Silver for immediate delivery rose 0.5 percent to $23.072 an ounce. Yesterday, the price soared 5.6 percent.

Spot palladium jumped 2.2 percent to $734.45 an ounce. The price climbed for the fifth straight session, the longest rally in two months.

Platinum fell 0.1 percent to $1,463.60 an ounce.

To contact the reporters on this story: Debarati Roy in New York at droy5@bloomberg.net; Whitney McFerron in London at wmcferron1@bloomberg.net

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

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