Gold Futures Advance as Equities Tumult Boosts Haven Appeal

HSBC FX Strategy Head Maher: Gold Bear Is Over
  • Investors add to exchange-traded holdings for ninth day in row
  • Silver and gold volumes above typical levels in New York

Gold futures gained the most in almost two weeks as global equities retreated, boosting demand for haven assets. Investors increased holdings in funds backed by the precious metal for a ninth day, building their stake at the fastest pace in seven years.

World equities fell for a second day, the first consecutive decline in almost two weeks, while the dollar erased earlier gains against a basket of 10 currencies, fueling the appeal of gold as an alternative asset. A report from the International Monetary Fund on Tuesday showed central banks including Kazakhstan and Russia expanding bullion holdings.

Gold is up 17 percent in 2016 as volatility in financial markets and concern over global economic growth has reduced bets that the U.S. Federal Reserve will increase interest rates this year, boosting the metal’s appeal as a store of value. Bullion may rally to as high as $1,400 an ounce from about $1,245 on Wednesday should risk aversion intensify, according to Barnabas Gan, an Oversea-Chinese Banking Corp. economist and the top-ranked precious metals forecaster.

“The lack of risk appetite in the first months of the year has been good for the gold price,” Jens Pedersen, a Danske Bank A/S analyst in Copenhagen, said by e-mail. “The flight to ETFs has been driven by growth concerns, Fed repricing, confusing Chinese FX policy and looming risk of deteriorating geopolitical situation in the Middle East.”

Gold futures for April delivery advanced 1.3 percent to settle at $1,239.10 an ounce on the Comex in New York, the biggest gain since Feb. 11.

Investors were net buyers of exchange-traded funds on all but five days this year, data compiled by Bloomberg showed as of Tuesday.

“Weaker world equities markets have been bullish for gold recently,” Jim Wyckoff, a senior analyst at Kitco Metals Inc., a research company in Montreal, said in a report.

* Holdings in bullion backed exchange-traded products rose 0.9 metric ton to 1,666.15 tons on Tuesday. That’s the highest level since March 2015 and an increase of 14 percent for the best start to a year since 2009.

* Gold volumes traded on the Comex in New York were 71 percent above the 100-day average for the time of day. Silver trading was more than double the normal amount.

* Silver futures rose on the Comex, while palladium fell and platinum advanced on the New York Mercantile Exchange.

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