Gold posted the longest rally since July 2011, topping $1,300 an ounce for the first time since November, after signs of faltering U.S. economic growth added to the increasing investor appetite for haven assets.
U.S. retail sales fell in January by the most since June 2012, and jobless claims unexpectedly rose last week, government data showed today. Federal Reserve Chairman Janet Yellen said Feb. 11 that the recovery in the U.S. labor market is “far from complete.” Gold jumped 70 percent from December 2008 to June 2011 as the central bank pumped more than $2 trillion into the financial system.
Gold last year tumbled the most since 1981 after some investors lost faith in the metal as a store of value. In 2014, the price has climbed 8.1 percent amid a drop in emerging-market currencies and rising demand for coins and bars. The rally hasn’t swayed Goldman Sachs Group Inc. analysts who yesterday reiterated that prices will “grind lower.” The 2013 slump forced writedowns for Barrick Gold Corp. and Goldcorp Inc.
“The deterioration in the job market is becoming increasingly evident,” said Jeff Sica, who helps oversee more than $1 billion of assets as president of Sica Wealth Management in Morristown, New Jersey. “People are realizing that the economy still needs stimulus to grow, and that is keeping gold supported. Yellen sounded dovish. Today’s key economic numbers makes it clear that all is not well.”
Gold futures for April delivery rose 0.4 percent to close at $1,300.10 at 1:43 p.m. on the Comex in New York. After the settlement, the price reached $1,302.40, the highest for a most-active contract since Nov. 8. The metal climbed for the seventh straight session.
“The economic data today helped reaffirm the idea that the Fed is tapering too fast,” Dan Denbow, a fund manager at the $1.1 billion USAA Precious Metals & Minerals Fund in San Antonio, said in a telephone interview. “There is a shift in sentiment, which is helping prices move up. The emerging-market situation and physical demand continues to remain supportive.”
The U.S. central bank cut monthly bond buying by $10 billion at each of its past two meetings, leaving purchases at $65 billion. Yellen said this week that asset purchases aren’t on a “pre-set course.”
The China Gold Association said on Feb. 10 that the nation’s consumption jumped 41 percent in 2013 to 1,176.4 metric tons as demand for jewelry and bars increased. The country probably overtook India as the largest consumer last year. Sales of American Eagle gold coins by the U.S. Mint rose 63 percent in January to the highest since April.
“Physical demand is very price sensitive,” Bart Melek, an analyst at TD Securities in Toronto, said in a telephone interview. “We could see demand slow if prices surge.”
Gold fell into a bear market in April partly as a rally in U.S. equities cut demand for haven assets The metal will drop to $1,050 by the end of the year, Goldman analysts led by Jeffrey Currie said yesterday in a report, citing expectations for improving U.S. growth. Further depreciation in emerging-market currencies may hurt demand for jewelry in those countries, Goldman said.
“The path will be more of a slow grind lower over the course of the year, unlike last year, as markets will wait for strong economic data to confirm that U.S. economic growth is accelerating,” Currie said.
Barrick, the top producer, said yesterday it took $2.82 billion of writedowns in the fourth quarter, bringing the total in 2013 to $11.5 billion. Goldcorp, the second-largest, reported $443 million of impairments. Kinross Gold Corp. and Agnico Eagle Mines Ltd. cited writedowns yesterday in fourth-quarter earnings statements.
The value of gold held in exchange-traded products tumbled about $73 billion in 2013. Billionaire John Paulson, the top holder in the SPDR Gold Trust, the biggest ETP, said Nov. 20 that he personally wouldn’t invest more money into his gold fund because it’s not clear when inflation will quicken.
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