Gold Swings Near 5-Week High Before Fed Policy Meeting

Gold gained for the third straight session after factory production in the U.S. rose less than forecast, reviving prospects for an extension of economic stimulus by the Federal Reserve.

Output at factories rose 0.1 percent in September, trailing the 0.3 percent estimate in a Bloomberg survey of economists, figures from the Fed showed today. The central bank starts a two-day meeting tomorrow. Gold tumbled 19 percent this year amid concern the Fed would slow its $85 billion in monthly debt purchases as the economy strengthens.

“The market expects the Fed to postpone tapering for a few months at least,” Adam Klopfenstein, a senior market strategist at Archer Financial Services Inc. in Chicago, said in a telephone interview.

Gold for immediate delivery gained 0.3 percent to $1,354.50 an ounce at 1:52 p.m. in New York. Bullion climbed 2.6 percent last week, the second straight advance.

On the Comex in New York, gold futures for December delivery settled little changed at $1,352.20. Prices are poised for the first annual drop in 13 years as some investors lost faith in the metal as a store of value.

The 16-day U.S. government shutdown probably trimmed 0.25 percentage point from fourth-quarter economic growth and cost 120,000 jobs this month, according to Jason Furman, head of the president’s Council of Economic Advisers.

‘Lack Support’

“With the recent shutdown, fiscal brinkmanship and modest employment numbers, there is little reason to taper,” Suki Cooper, an analyst at Barclays Plc in New York, wrote in a report today. “Prices lack support from the physical market for sustained gains.”

Russia’s central bank sold gold for the first time in a year. Its reserves fell about 0.37 metric ton to 1,015.1 tons in September, data on the International Monetary Fund’s website showed. Mexico reduced holdings for a 17th straight month, while Kazakhstan expanded assets for a 12th successive month, the data showed.

Silver futures for December delivery lost 0.4 percent to $22.538 an ounce on the Comex.

On the New York Mercantile Exchange, platinum futures for January delivery gained 1.2 percent to $1,472.90 an ounce, the biggest advance for a most-active contract since Oct. 17. Palladium futures for December delivery rose 0.3 percent to $750.45 an ounce on the Nymex.

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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