Gold posted the biggest weekly gain since August as signs of a faltering recovery in the U.S. economy boosted demand for precious metals as a haven. Silver had the longest rally since March 2008.
U.S. factory production unexpectedly declined in January by the most since May 2009, figures from the Federal Reserve showed. Gold rose for the eighth straight session, extending the longest rally since July 2011. The price closed above the 200-day moving average for the first time in a year.
Gold has jumped 9.7 percent this year. In 2013, the price plunged 28 percent, the most since 1981, as billionaires John Paulson and George Soros sold holdings, while other investors lost faith in the metal as a store of value amid a U.S. equity rally to a record and tame inflation. Fed Chairman Janet Yellen said on Feb. 11 that the recovery in the labor market is “far from complete.”
“Gold has broken the downtrend, and we are going to see some buying come in,” Lance Roberts, who oversees $600 million as chief executive officer of STA Wealth in Houston, said in a telephone interview. “Yellen and the Fed will definitely not take away the stimulus since it is becoming increasingly clear that the economy is not healthy.”
Gold futures for April delivery rose 1.4 percent to settle at $1,318.60 an ounce at 1:42 p.m. on the Comex in New York. This week, the price climbed 4.4 percent, the most since Aug. 16.
Silver futures for March delivery jumped 5 percent to $21.421 an ounce. The price reached $21.445, the highest for a most-active contract since Nov. 11. The metal, up for the 10th straight session, has climbed 11 percent this year after tumbling 36 percent in 2013.
The Fed’s monthly bond purchases have been reduced to $65 billion after cuts of $10 billion at each of its past two meetings. Yellen said this week that debt buying isn’t on a “pre-set course.” Gold jumped 70 percent from December 2008 to June 2011 as the central bank pumped more than $2 trillion into the financial system, raising inflation concerns.
Gold’s settlement above the 200-day moving average of $1,309.63 signals a rally to $1,600 for the first time since April, said Dave Lutz, the head of exchange-traded fund trading and strategy at Stifel Nicolaus & Co. in Baltimore.
“Clearly, there is a shift in sentiment, and we are seeing more buying in gold,” said Lutz, who correctly predicted in December 2012 that prices were heading for declines using analysis based on the moving average.
Gold has traded above the 100-day moving average since Feb. 10, and climbed above the 50-day measure every day since Jan. 23. In January, the metal rose 3.1 percent, snapping a four-month slump.
Assets in the SPDR Gold Trust, the biggest exchange-traded product backed by the metal, rose yesterday to 806.35 metric tons, the highest since Dec. 20. Holdings are headed for a third weekly advance after tumbling 41 percent in 2013.
Paulson, the largest holder in the SPDR Gold fund, maintained his stake in the third quarter after cutting his investment by more than half in the the prior three months, according to government filings. Soros sold his entire stake in the second quarter. Fourth-quarter filings are scheduled for today.
Barclays Plc said today that “the rally will flounder.”
“It bodes well for prices that investor interest has shown signs of stabilising, but, in our view, without a more meaningful shift in sentiment, prices are likely to struggle to retain their recent gains,” the bank said in a report.
Goldman Sachs Group Inc. this week affirmed a forecast for lower prices. The metal will drop to $1,050 by the end of the year, analysts led by Jeffrey Currie said in a report, citing expectations for improving U.S. growth.
Barrick Gold Corp, the world’s top producer, took $2.82 billion of writedowns in the fourth quarter, bringing the total in 2013 to $11.5 billion. Goldcorp, the second-largest, reported $443 million of impairments.