Gold Futures Jump to Eight-Week High as Equities Drop

Gold jumped to an eight-week high as a tumble in equity markets boosted demand for the metal as an alternative investment. Platinum and palladium also surged.

The MSCI All-Country World Index of stocks headed for the biggest drop in seven weeks. The World Gold Council said today that global jewelry demand jumped 37 percent to 575.5 metric tons in the second quarter, with combined bar and coin sales jumping 78 percent from a year earlier to an all-time high of 507.6 tons as purchases more than doubled in India and China,.

“Some people are looking at gold as a flight-to-quality instrument with the big selloff in the equity markets,” Adam Klopfenstein, a senior market strategist at Archer Financial Services Inc. in Chicago, said in a telephone interview. “Physical demand is also supportive.”

Gold futures for December delivery rose 2.1 percent to close at $1,360.90 an ounce at 1:49 p.m. on the Comex in New York, the biggest gain for a most-active contract since July 22. After the settlement, the price reached $1,369.60, the highest for a most-active contract since June 19.

“A lot of buy stops were triggered” as the rally accelerated at 12:45 p.m., Tom Power, a senior commodity broker at R.J. O’Brien & Associates in Chicago, said in a telephone interview.

The metal has advanced 15 percent from a 34-month low of $1,179.40 on June 28.

Global ETPs

Gold is still down 19 percent this year, entering a bear market in April, as some investors lost faith in the commodity as an alternative investment amid a U.S. equity rally and low inflation. The value of global exchange-traded products backed by the metal has plunged by $56.1 billion.

Billionaire John Paulson cut holdings in the SPDR Gold Trust, the biggest ETP, by 53 percent in the second quarter, a government filing showed yesterday. Soros Fund Management LLC and Daniel Loeb’s Third Point sold their entire stakes in the fund, separate filings showed.

On the New York Mercantile Exchange, palladium futures for September delivery climbed 2.2 percent to $756.85 an ounce. The price reached $769.50, the highest since June 11. Trading almost doubled compared with the average in the past 100 days, according to data compiled by Bloomberg. The metal has advanced 7.6 percent this year.

Platinum futures for October delivery climbed 1.8 percent to $1,532.30 an ounce. The metal reached $1,536, the highest since June 7. The price has dropped 0.7 percent this year.

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