Gold Climbs for Second Day as Plunge Lures Buyers; Futures Drop

Cash gold advanced for a second day on speculation that the biggest slump in three decades will spur increased purchases from investors and consumers. Futures resumed a decline.

Gold for immediate delivery gained as much as 1.1 percent to $1,382.85 an ounce and was at $1,373.35 at 2:19 p.m. in Singapore. Prices touched $1,321.95 yesterday, the lowest since January 2011. Bullion’s 14-day relative strength index was at 22.3, below the level of 30 that indicates to some analysts who study technical charts that a rebound may be imminent. The 9.1 percent plunge on April 15 was the most since 1983.

Bullion has lost 18 percent in 2013 after rising sixfold in a 12-year rally through last year. The metal fell 5 percent on April 12, slipping into a bear market, on speculation central banks in Europe may sell holdings to raise funds and that a U.S. recovery would spur the Federal Reserve to rein in stimulus. Prices extended declines after CME Group Inc. raised margins.

“If you look at the fundamentals, the drop was excessive and does not correspond to the reality that we still have a lot of troubles out there -- debt monetization, real interest rates will remain in negative territory and the dollar in the long run still is a currency that won’t be that strong,” Dominic Schnider, head of commodities research at UBS AG’s wealth-management unit, said in a Bloomberg Television interview. “Nevertheless, a lot of damage has been done.”

Gold for June delivery dropped as much as 1.6 percent to $1,365 an ounce on the Comex in New York, before trading at $1,372.90. Futures rallied 1.9 percent yesterday following a two-day, 13 percent slump that was the worst in three decades. Bullion held in exchange-traded products decreased for an 11th day to 2,377.791 metric tons yesterday, the least since June.

Sales Surge

Gold sales from Australia’s Perth Mint, which refines nearly all of the nation’s bullion, surged after prices plunged, Treasurer Nigel Moffatt said. In India, the largest consumer, the plunge may make bullion more affordable, according to Mehul Choksi, chief executive officer of Gitanjali Gems Ltd., the nation’s biggest retailer of jewelry and diamonds by sales.

Longer-term investors are going to be very cautious about re-entering until they see some stability, said Morgan Stanley’s analyst Peter Richardson. Gold rallied for 12 years as central banks joined investors in buying bullion to hedge against weaker currencies and the threat of rising consumer prices.

“Gold was set up for having a proper correction,” Jim Rogers, chairman of Rogers Holdings, said on Bloomberg Television’s “On the Move” with Rishaad Salamat. “This may be the proper correction and if so, then it will make a bottom and we can all buy gold again because gold is going much higher over the decade.”

Cash silver slipped 0.6 percent to $23.26 an ounce after swinging between gains and losses. The price dropped to $22.07 yesterday, the cheapest since October 2010.

Spot platinum, which fell to $1,375.50 an ounce yesterday, the lowest since December 2011, retreated 0.7 percent to $1,438.75. Palladium was little changed at $676.60 an ounce after touching a more than four-month low of $647.25 yesterday.

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