Gold held its rebound from the lowest close in more than three years on speculation investors will trim bets on further losses before the year-end and as lower prices encourage purchases.
Bullion for immediate delivery gained as much as 0.3 percent to $1,207 an ounce and traded at $1,203.76 by 8:08 a.m. in Singapore. The price closed at $1,188.68 on Dec. 19, the lowest since Aug. 3, 2010, after the Federal Reserve said it will reduce stimulus. The metal rallied 1.2 percent on Dec. 20. Holdings in the largest exchange-traded product increased for the first time in six weeks.
Gold has tumbled 28 percent this year, set for its worst annual drop since 1981, and will fall further as the Fed acts amid an improving economy, according to Goldman Sachs Group Inc. The Fed said on Dec. 18 it will cut monthly asset purchases to $75 billion from $85 billion, while pledging to keep interest rates near zero. Money managers increased their short gold positions by 1.2 percent in the week ended Dec. 17, U.S. Commodity Futures Trading Commission data show.
“Short positions have increased and gold may have a bounce if investors close them out before the end of the year,” said Mark To, head of research at Wing Fung Financial Group, a Hong Kong-based trader and refiner. “Below $1,200 is still an attractive entry point for some.”
Holdings in the SPDR Gold Trust rose to 814.12 metric tons on Dec. 20, expanding for the first time since Nov. 6, according to data on the fund’s website. Last month, Turkey added gold to its reserves as Russia and Mexico reduced, International Monetary Fund data show.
In China, volumes for the benchmark cash contract on the Shanghai Gold Exchange, climbed to a 10-week high on Dec. 19 after prices slumped to the lowest level since February 2010.
Gold for February delivery was at $1,201.90 an ounce on the Comex from $1,203.70 on Dec. 20, when prices rebounded 0.8 percent after reaching the lowest settlement since 2010 the previous day. Trading volume was 49 percent below the 100-day average for this time, data compiled by Bloomberg showed.
Short gold positions rose to 75,199 contracts, within 6 percent of the record reached in July, according to CFTC. Net-long positions fell 2.8 percent to 32,524 in the week.
Silver for immediate delivery was little changed at $19.4065 an ounce. Platinum gained 0.2 percent to $1,335.28 an ounce and palladium increased 0.3 percent to $700.70 an ounce.
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