Gold-Fund Inflows Jumped Most in 11 Months Before Fed
EPFR Global, which tracks money flows, said data showed investors poured $850 million into gold funds, the most since October, before the Federal Reserve surprised markets by maintaining the pace of U.S. stimulus.
In the week ended Sept. 18, the jump in gold investments helped boost flows into commodity funds by $1.2 billion, Cameron Brandt, the director of research at Cambridge, Massachusetts-based EPFR, said today in a telephone interview. In the week ended Sept. 11, gold inflows were $264 million. They were $1.16 billion in the week ended Oct. 10.
Speculation that the Fed would limit the pace of monthly bond buying, along with signs of demand for jewelry, coins and bars in Asia, probably boosted gold demand, Brandt said. Yesterday, gold futures in New York jumped the most since March 2009, a day after the Fed said it wouldn’t trim debt purchases yet, boosting demand for the metal as a store of value.
“A consensus had been starting to emerge that the Fed probably wouldn’t do its worst on stimulus,” Brandt said. “Investors have started to pick up on the appetite for physical gold, especially from emerging Asia, and to extrapolate that the price of gold may be due to go up.”
Gold on the Comex jumped 4.7 percent yesterday. Today, the price fell the most in 11 weeks after a Fed policy maker said a “small taper” in stimulus may occur in October. The Fed’s decision this week was a “borderline” call, Fed Bank of St. Louis President James Bullard said today on Bloomberg Television’s “Bloomberg Surveillance” with Tom Keene.
Gold futures for December delivery declined 2.7 percent to settle at $1,332.50 an ounce in New York, the biggest drop for a most-active since July 5.
The Fed buys $85 billion of Treasuries and mortgage debt each month as part of its quantitative-easing program. Thirty-three of 64 economists surveyed by Bloomberg predicted the central bank would reduce purchases by $5 billion or less, while 31 forecast a cut of $10 billion or more.
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