Gold Holds Below 12-Week High as Growth to U.S. Rates Assessed

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Gold futures capped the longest rally in more than six months as Switzerland’s decision to decouple its currency from the euro roiled currency markets, boosting demand for the metal as a haven.

The Swiss National Bank unexpectedly scrapped its three-year policy of capping the Swiss franc against the euro, one week before European policy makers meet to discuss new stimulus. The Bloomberg Dollar Spot Index, which tracks the U.S. currency against 10 major peers, fell for a second day, fueling demand for bullion as an alternative asset.

Gold has risen 6.8 percent this year as signs of deflation and cooling global economic growth spur speculation that the Federal Reserve will be slow to raise U.S. interest rates. Demand for the metal will rebound in 2015 after two straight annual declines as consumption in Asia advances and investors return to exchange-traded products backed by bullion, according to HSBC Securities (USA) Inc.

“The Swiss National Bank’s decision caught the market a little off footing, and gold gained as a safe-haven buy,” Frank McGhee, the head dealer at Alliance Financial LLC in Chicago, said in a telephone interview. “The Swiss are giving up on the euro at the end of a long and painful run.”

Gold futures for February delivery surged 2.5 percent to settle at $1,264.80 an ounce at 1:44 p.m. on the Comex in New York, after touching $1,267.20, the highest since Sept. 8. Prices gained for a fifth straight session, the longest rally since June 25.

The metal climbed above its 200-day price average for the first time since September.

The Swiss central bank’s shift marks an attempt to reinforce defenses of the Swiss economy before government bond purchases by the European Central Bank that could crumple the franc cap.

Rate Outlook

Gold climbed 70 percent from December 2008 to June 2011 as the Fed bought debt and held borrowing costs near zero percent in a bid to shore up economic growth. Fed Chair Janet Yellen has said it’s unlikely the central bank will raise rates before late April. Higher rates cut gold’s allure because the metal generally offers investors returns only through price gains.

U.S. retail sales last month fell by the most in almost a year, according to data released yesterday. A report today showed the number of Americans who apply for unemployment insurance last week unexpectedly climbed to a four-month high.

“In recent days, it’s looked like a U.S. rate increase might take longer than expected,” Mark O’Byrne, executive director of Dublin-based brokerage GoldCore Ltd., said by telephone.

Global gold demand may rise 15 percent to 4,127 metric tons this year, HSBC analysts James Steel and Howard Wen wrote in a report dated yesterday.

Silver futures for March delivery rose 0.7 percent to $17.102 an ounce on the Comex. Platinum futures for April delivery climbed 1.9 percent to $1,262.80 on the New York Mercantile Exchange, the highest closing price since Oct. 29. Palladium futures for March delivery declined 1.8 percent to $766.35 an ounce.

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