Gold futures approached $1,300 an ounce to post the longest rally in 11 months as signs of slowing global economies boosted demand for the metal as a haven.
Assets in the SPDR Gold Trust, the biggest exchange-traded product backed by the metal, last week rose 3.3 percent, the most since May 2010. Economists expect European Central Bank President Mario Draghi to make his biggest push yet to steer the euro area away from deflation by announcing quantitative easing on Jan. 22, according to a Bloomberg survey.
After shunning gold for two years, investors are returning to the metal amid concern that U.S. growth won’t be enough to offset weakness in foreign economies. Policy makers in Europe and Asia are being challenged to come up with fresh ways to stimulate expansion amid prolonged below-target inflation. The International Monetary Fund on Monday made the steepest cut to its global-growth outlook in three years.
“People are rediscovering gold since there is so much uncertainty about Europe,” George Gero, a New York-based precious-metal strategist at RBC Capital Markets LLC, said in a telephone interview. “They want to safeguard against the global economic weakness.”
Gold futures for February delivery climbed 1.4 percent to settle at $1,294.20 at 1:39 p.m. on the Comex in New York. Earlier, the price touched $1,297.20, the highest for a most-active contract since Aug. 28. The metal advanced for a seventh straight session, the longest rally since Feb. 18.
Call options giving the owners the right to buy February futures at $1,300 have soared 10-fold in three sessions.
The call price climbed to $14.30 at 3:07 p.m. as the most-active option with estimated trading at 3,071 contracts, up from a settlement of $1.40 on Jan. 14.
Prices jumped 5 percent last week week, the most in 18 months, as investors sought safety from turmoil in currency markets after the Swiss central bank unexpectedly abandoned the franc’s cap against the euro. The metal has climbed 9.3 percent this year.
Gold declined 1.5 percent in 2014 as equities surged and an improving U.S. economy cut demand for haven assets. In 2013, the metal tumbled 28 percent, the most in more than three decades. Global shares are heading for a second straight monthly loss as a slowdown in Europe drags down global growth. In January, bullion advanced 9.3 percent.
Gold climbed 70 percent from December 2008 to June 2011 as central banks increased money supply on an unprecedented scale, spurring concerns that inflation would accelerate. The metal generally offers investors returns only through price gains.
Federal Reserve Chair Janet Yellen has said it’s unlikely the central bank will raise rates before late April.
Silver futures for March delivery rose 1.2 percent to $17.956 an ounce. Earlier, the price reached $18.045, the highest since Sept. 19.
On the New York Mercantile Exchange, palladium futures for March delivery jumped 3.2 percent to $778.75 an ounce, the biggest gain since Nov. 21.
Platinum futures for April delivery rose 1.4 percent to $1,286.60 an ounce.