Gold Advances in New York as Dollar Drop Boosts Demand

Gold advanced for a second straight day as a drop in the dollar and a report that China’s central bank implemented new stimulus measures boosted demand for the metal as an alternative investment.

The People’s Bank of China provided 500 billion yuan ($81.4 billion) of liquidity to the nation’s five biggest banks, Sina.com reported, citing Qiu Guanhua, an analyst at Guotai Junan Securities Co. The dollar fell as much 0.5 percent against a basket of currencies. U.S. Federal Reserve officials meet today and tomorrow as investors assess economic data for cues on the timing of an interest-rate increase.

“Gold is getting a bid as the dollar weakened and China has announced some stimulus program,” Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago, said in a telephone interview. “Tomorrow’s decision on the rates will be the guiding force for gold going forward.”

Gold futures for December delivery climbed 0.1 percent to settle at $1,236.70 an ounce at 1:44 p.m. on the Comex in New York. Earlier, prices fell as much as 0.2 percent. Yesterday, the metal gained 0.3 percent, snapping five straight declines.

Bullion is heading for the first quarterly loss this year as the Bloomberg Dollar Spot Index advanced to a 14-month high and the Fed moves toward ending its unprecedented monthly asset-purchase program. An improving American economy and equities near all-time highs are also damping investor interest in gold, even as the U.S. expands sanctions against Russia and ramps up its military campaign in Iraq.

Low Volatility

The 60-day historical volatility of gold is near the lowest since October 2010, according to data compiled by Bloomberg. Open interest in New York futures and options is near the lowest in five years, while money managers have cut their bullish holdings for four straight weeks.

Silver futures for delivery in December rose 0.5 percent to $18.721 an ounce on the Comex.

On the New York Mercantile Exchange, platinum futures for delivery in October climbed 0.3 percent to $1,367.30 an ounce, ending a six-session slump that was the longest since Aug. 25. Palladium futures for delivery in December climbed 0.9 percent to $844.30 an ounce, the third straight advance.

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