Gold rose for the first time in three days in London on Bangladesh’s purchase of 10 metric tons of bullion from the International Monetary Fund and on speculation that the earlier declines will spur physical demand.
Bangladesh’s central bank bought the metal for about $403 million based on market prices prevailing on Sept. 7, the IMF said yesterday. Gold, trading 1.3 percent below a record, fell the most in six weeks yesterday. Bullion is headed for a sixth weekly gain, the longest winning streak since September 2007. It usually moves inversely to the dollar, which was set for the biggest weekly gain in a month against the euro.
The Bangladeshi purchase may “provide the additional driver gold needs to make fresh record highs,” said Edel Tully, a London-based analyst at UBS AG. She cited “decent physical buying from India” after yesterday’s decline, which “does help to provide underlying support.”
Bullion for immediate delivery added $5.71, or 0.5 percent, to $1,249.36 an ounce at 11:34 a.m. in London. Prices are up 0.2 percent this week. Gold for December delivery was little changed at $1,251 on the Comex in New York.
The metal declined to $1,248.75 in the morning “fixing” in London, used by some mining companies to sell output, from $1,255 at yesterday’s afternoon fixing. Commerzbank AG raised its fourth-quarter forecast for average prices to $1,300, from $1,250.
The IMF said in September 2009 it would put 403.3 tons of bullion up for sale as part of a plan to shore up its finances and lend at reduced rates to low-income countries. The lender has sold a combined 212 tons to India, Sri Lanka and Mauritius and said yesterday it disposed of a further 88.3 tons in “on-market” sales.
10th Annual Climb
The latest transaction “will push gold higher, as central-bank purchases have traditionally been a major factor fueling the price,” said Hwang Il Doo, a senior trader at Korea Exchange Bank Futures Co. in Seoul. “Central banks want to diversify their reserves because of the unstable dollar.”
Bullion is set for a 10th annual gain as investors seek protection against financial turmoil in Europe and the prospect of slowing economic growth. Prices reached a record $1,265.30 on June 21. Gold, traditionally a hedge against rising consumer prices, rallied 14 percent since the start of January even as U.S. inflation slowed in five of the first seven months.
The euro dropped this week on concern about sovereign debts in Europe. European Central Bank President Jean-Claude Trichet said in a Financial Times interview published yesterday that banks will need time to be weaned from its emergency lending measures. ECB executive board member Miguel Angel Fernandez Ordonez said yesterday another bout of financial instability can’t be ruled out.
Gold declined 0.9 percent yesterday after data showed the U.S. trade deficit narrowed more than forecast in July and filings for jobless benefits plunged last week. Prices reached a two-month high of $1,262.45 on Sept. 8.
Twenty of 25 traders, investors and analysts surveyed by Bloomberg, or 80 percent, said the metal will gain next week as concern that the world economic recovery is stalling spurs demand for bullion to protect wealth.
Physical demand “picked up again in recent days as doubts about the eurozone banking system returned,” analysts at Dublin-based broker GoldCore Ltd. said in a report. Resistance near the $1,260 level “could signify gold needs a breather and may correct again and consolidate before making new record highs.”
Gold holdings in the SPDR Gold Trust, the biggest exchange- traded fund backed by the metal, fell 0.91 ton to 1,293.53 tons yesterday, the company’s website showed. Holdings reached a record 1,320.44 tons in June.
Silver for immediate delivery in London gained 1.3 percent to $19.9412 an ounce. Platinum was little changed at $1,553.25 an ounce. Palladium lost 0.5 percent to $521.25 an ounce.