Gold Advances as Yellen Says Economic Data Points to ‘Softness’

Gold futures rose after Federal Reserve Chair Janet Yellen said recent data have pointed to “softness” in the U.S. economy, increasing demand for the precious metal as an alternative investment.

“Part of that softness may reflect adverse weather conditions, but at this point it’s difficult to discern exactly how much,” Yellen told the Senate Banking Committee today. This year, gold has gained 11 percent. In 2013, the metal plunged 28 percent, the most since 1981, amid a U.S. equity rally to a record and muted inflation.

“There is some safe-haven buying,” Frank Lesh, a trader at FuturePath Trading LLC in Chicago, said in a telephone interview. “The Fed clearly seems concerned about the economic conditions.”

Gold futures for April delivery climbed 0.3 percent to settle at $1,331.80 an ounce at 1:47 p.m. on the Comex in New York. Yesterday, the price reached $1,345.60, the highest for a most-active contract since Oct. 30.

Yellen affirmed the Fed’s pledge to keep the benchmark interest rate low at least as long as unemployment stays above 6.5 percent and the outlook for inflation doesn’t exceed 2.5 percent.

Gold headed for the second straight monthly gain, the longest rally since August, amid turmoil in emerging markets and concern that the U.S. recovery may be faltering. Gunmen occupied Ukraine’s Crimea regional parliament and raised the Russian flag as lawmakers in the capital meet to approve a new cabinet after last week’s ouster of Viktor Yanukovych as leader.

‘Geopolitical Risks’

“Heightened geopolitical risks as tensions in the Ukraine mount are supportive of gold,” James Steel, an analyst at HSBC Securities (USA) Inc., said in a note. “Should events in Ukraine deteriorate and involve neighboring countries, gold could benefit from increased safe-haven demand.”

Gold for immediate delivery fell 0.1 percent to $1,329.58 at 2:43 p.m. after gaining as much as 0.4 percent.

Analysts are split on the price outlook.

Gold will decline to $1,011 in December as the Fed tapers monetary stimulus and the dollar strengthens, Westpac Banking Corp. said Feb. 20. Goldman Sachs Group Inc. said the metal will drop to $1,050 by the end of the year.

UBS AG said Feb. 19 that the commodity has “started to shed its stigma” and increased its 2014 forecast to $1,300 from $1,200. Credit Agricole SA’s private-banking unit said this week that “the easy money from being net short is probably behind us” amid sustained demand in China.

SPDR Holdings

Assets in the SPDR Gold Trust, the biggest exchange-traded product backed by the metal, were unchanged yesterday after gaining for three straight sessions. Holdings are headed for the first monthly increase since December 2012.

Silver futures for May delivery rose 0.3 percent to $21.352 an ounce on the Comex. In February, the price has climbed 12 percent, snapping a three-month slump.

On the New York Mercantile Exchange, platinum futures for April delivery climbed 1.7 percent to $1,453.40 an ounce, the biggest gain since Jan. 2. Trading doubled compared with the average in the past 100 days for this time, data compiled by Bloomberg show.

A miner union with 70,000 members in South Africa, the world’s biggest producer, has been on strike since Jan. 23, spurring supply concerns.

Palladium futures for June delivery jumped 1.4 percent to $743.85 an ounce.

Before it's here, it's on the Bloomberg Terminal.