July 22 (Bloomberg) -- Gold gained the most in more than a year on speculation that the Federal Reserve will maintain U.S. economic stimulus, boosting the appeal of the precious metal as a store of value. Silver also surged.
Bullion rose 1.3 percent last week, capping the first back-to-back weekly gains since May, after Fed Chairman Ben S. Bernanke indicated that it’s too early to decide whether to begin scaling back bond purchases in September. Existing home sales in the U.S. fell 1.2 percent in June, the National Association of Realtors said today.
“Bernanke’s statement has a put a bid under gold,” Bart Melek, the head of commodity strategy at TD Securities in Toronto, said in a telephone interview. “Also, the weak housing data confirms the fact that stimulus is here to stay for some time.”
Gold futures for December delivery rose 3.3 percent to settle at $1,337.30 an ounce at 1:43 p.m. on the Comex in New York, the biggest gain since June 29, 2012. Earlier, the metal reached $1,340.50, the highest for a most-active contract since June 20.
Prices have dropped 20 percent this year, wiping $57 billion from the value of gold exchange-traded product holdings, after some investors lost faith in the metal as a store of value and amid concern that the Fed may slow the pace of the stimulus.
The Bloomberg Dollar Index, which tracks the greenback against 10 major currencies, dropped to the lowest since June 20 as Bill Gross, the co-chief investment officer at Pacific Investment Management Co., said he expected the Fed won’t tighten policy before 2016.
Hedge funds and other large speculators increased their net-long position by 56 percent to 55,535 contracts by July 16, the highest since June 4, U.S. Commodity Futures Trading Commission data show. Short contracts fell the most since November after reaching a record the previous week.
Silver futures for September delivery gained 5.4 percent to $20.509 an ounce in New York, the most since April 25. Earlier, prices rose to $20.575, the highest since June 20.
An ounce of gold bought as many as 66.6 ounces of silver on July 19 in London, the most since August 2010, data compiled by Bloomberg show.
On the New York Mercantile Exchange, platinum futures for October delivery rose 1.2 percent to $1,448 an ounce, after touching $1,456.40, the highest since June 14.
Palladium futures for September delivery gained 0.1 percent to $750.45 an ounce. Trading was 45 percent below the average in the past 100 days, according to data compiled by Bloomberg.
To contact the editor responsible for this story: Steve Stroth at email@example.com