Gold Rises on Weaker U.S. Data as Palladium at 11-Month High

Gold gained for the second time in three days as weaker U.S. economic growth and Russia-Ukraine tension underpin demand for haven assets. Palladium advanced to the highest since April amid supply concerns.

Service industries expanded in February at the slowest pace in four years, while companies added fewer workers than economists projected, private reports in the U.S. showed today. U.S. Secretary of State John Kerry today met Russian Foreign Minister Sergei Lavrov, who said the western-backed government in Kiev no longer rules over Crimea.

“The weaker economic data out of the U.S. continues to support gold,” Adam Klopfenstein, a senior market strategist at Archer Financial Services in Chicago, said in a telephone interview. “People are closely monitoring the situation in Ukraine.”

Gold futures for April delivery rose 0.2 percent to settle at $1,340.30 an ounce at 1:36 p.m. on the Comex in New York. Prices reached $1,355 on March 3, the highest since Oct. 30.

The metal has rebounded 11 percent in 2014, after the biggest annual decline since 1981 last year, on signs of slowing economic growth. Federal Reserve Chair Janet Yellen said last week the central bank is “open to reconsidering” the pace of cutbacks in stimulus should the economy weaken.

The Fed, which next meets March 18-19, announced a reduction to bond buying at each of its past two meetings, leaving purchases at $65 billion. Gold surged 70 percent from December 2008 to June 2011 as the central bank pumped more than $2 trillion into the financial system to boost growth.

Eight of the Fed’s 12 districts “reported improved levels of activity, but in most cases the increases were characterized as modest to moderate,” the Fed said today in its Beige Book business survey. The New York and Philadelphia districts reported declines that were “mostly attributed to the unusually severe weather experienced in those regions.”

Palladium Surges

Palladium advanced this week amid the turmoil between Russia and Ukraine and as a mine strike in South Africa, the second-biggest producer, neared the end of its sixth week.

“The overall picture is still very much all about Ukraine and Russia,” David Govett, the head of precious metals at Marex Spectron Group in London, wrote today in a report. “With mutterings of sanctions against Russia along with the continuing situation vis-a-vis strikes in South Africa, it was only a matter of time” before prices rose, he said.

Russia accounted for about 40 percent of palladium mine supply last year and South Africa about 37 percent, according to London-based Johnson Matthey Plc. More than 70,000 members of the Association of Mineworkers and Construction Union in South Africa, the biggest platinum producer, have been on strike since Jan. 23.

Palladium futures for June delivery advanced 1.2 percent to $772.85 an ounce. Earlier, prices rose to $783, the highest since April 1.

Sanctions against Russia could push prices closer to $1,000, UBS AG wrote in a report today.

Platinum futures for April delivery rose 0.9 percent to $1,476.60 an ounce. Earlier, the price touched $1,489, the highest since Sept. 9. Holdings of the metal in exchange-traded products expanded to a record 78.3 metric tons yesterday, data compiled by Bloomberg show.

Silver futures for May delivery climbed 0.2 percent to $21.271 an ounce on the Comex.

To contact the reporters on this story: Debarati Roy in New York at droy5@bloomberg.net; Nicholas Larkin in London at nlarkin1@bloomberg.net

To contact the editor responsible for this story: Millie Munshi at mmunshi@bloomberg.net

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