Gold futures rose on speculation that the Federal Reserve will maintain bond purchases to bolster the U.S. economy, while demand for coins and jewelry climbed.
Slowing inflation offers the Fed more scope to provide the economy with more liquidity and lower interest rates for longer. Chow Sang Sang Holdings International Ltd. said that jewelry sales at its 44 shops in Hong Kong more than doubled in the two weeks ended April from a year ago. Last week, gold jumped 4.2 percent, the most in 15 months, partly as coin demand from mints in the U.S. and Australia soared after futures on April 15 plunged 9.3 percent, the most in 33 years.
“The Fed meeting is crucial as data out of U.S. has been mixed,” Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago said in a telephone interview. “Physical demand continues to remain strong.”
Gold futures for June delivery gained 0.9 percent to settle at $1,467.40 an ounce at 1:41 p.m. on the Comex in New York. The price headed for the biggest monthly drop since December 2011 after entering a bear market on April 12.
This month, holdings in exchange-traded products backed by gold have slumped 166.27 metric tons, heading for a record decline, according to data compiled by Bloomberg. On April 23, bets on a Comex price drop by hedge funds and other large speculators were 69,726 futures and options, within 0.6 percent of the all-time high reached six weeks earlier, U.S. Commodity Futures Trading Commission data showed on April 26.
Coin sales by the U.S. Mint headed for the highest since December 2009, while inventory monitored by the Comex last week touched the lowest since July 2008.
“The key question in the near term is whether retail and jewelry demand can continue to counter ETP outflows and the rise in gross shorts,” Barclays Plc analysts Suki Cooper, Lynnden Branigan and Christoper Louney said in a report. “In our view, the vulnerability of further ETP outflows subsides should prices recover to above the $1,500 level or equity markets underperform, given the stronger correlation between the two.”
HSBC cut its estimate for gold’s average price this year to $1,542 from $1,700, saying that the “capitulation in the gold price dealt a severe blow to investor confidence, which may take many months to restore.”
Silver futures for July delivery gained 1.6 percent to $24.166 an ounce on the Comex. The price has dropped 20 percent this year.
On the New York Mercantile Exchange, platinum futures for July delivery rose 2.1 percent to $1,507.40 an ounce.
Earlier, the price jumped as much as 3.3 percent amid concern that supplies from Impala Platinum Holdings Ltd. may be disrupted.
Zimbabwe Mines Secretary Prince Mupazviriho said that the country has no intention of stopping the acquisition of some land from an Impala unit as an appeal is discussed.
Anglo American Platinum Ltd. is the world’s biggest producer, following by Impala. The companies are based in South Africa.
Palladium futures for June delivery climbed 2.5 percent to $699.20 an ounce, the biggest gain since March 20.