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Gold Advances in London as Central Banks Boost Bullion Reserves

Gold rose for the first time in four days in London, trimming the worst weekly decline in six months, on expectations central banks will continue buying bullion after data showed Brazil boosted its reserves for a third month.

Brazilian holdings expanded the most in 12 years, rising 14.7 metric tons in November, data from the International Monetary Fund showed. The nation’s holdings doubled since August. Central banks have bought 426.5 tons of gold so far this year, UBS AG said in a report today. Bullion is 5.6 percent higher this year, set for a 12th annual gain.

“The central banks in emerging economies have been continuing their policy of diversifying their currency reserves,” said Daniel Briesemann, an analyst at Commerzbank AG in Frankfurt. “This trend is likely to continue next year, meaning that central banks will play a considerable part in the price increase we envisage in 2013.”

Gold for immediate delivery rose 0.2 percent to $1,650.51 an ounce by 9:59 a.m. in London. Gold for February delivery advanced 0.3 percent to $1,651.20 an ounce on the Comex in New York.

Bullion declined to as low as $1,635.70 yesterday, the lowest price since Aug. 22, after data showed the U.S. economy grew at a 3.1 percent annual rate last quarter, exceeding all projections in a Bloomberg survey. Bullion is 2.7 percent lower this week, the most since the period to June 22, set for a fourth weekly drop.

“Gold is likely to get caught between the crosscurrents of improvements in the outlook on the U.S. and the global economy and prolonged period of accommodative monetary policies,” UBS said in the report. Bullion’s drop below its 200-day moving average accelerated the sell-off yesterday, according to the report.

Vote Canceled

The dollar snapped a five-day decline today after House Republican leaders canceled a planned vote on Speaker John Boehner’s plan to allow higher tax rates for annual income above $1 million amid stalled budget talks. Fewer than two weeks remain to avert more than $600 billion in automatic spending cuts and tax increases, known as the fiscal cliff.

Silver was little changed at $29.939 an ounce, down 7.2 percent this week, while still 7.5 percent higher for the year.

Platinum was down 0.1 percent to $1,549.25 an ounce, still up 11 percent for the year, making it the best performer among precious metals. Palladium fell 0.7 percent to $674.42 an ounce, 3 percent higher for the year.

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