Gold Futures Post Biggest Two-Day Rally Since June

Gold futures jumped, capping the biggest two-day gain since June, as an oil rally damped concern that inflation will remain low and revived demand for the metal as a store of wealth. Silver surged the most in nine months.

Aggregate gold trading more than doubled compared with the 100-day average for this time, according to data compiled by Bloomberg. Today, an option wager on a price rebound to $1,200 an ounce surged as much as fivefold, while Brent crude jumped as much as 2.9 percent.

Oil tumbled into a bear market last month, and Federal Reserve officials warned that lower energy costs may hold down consumer costs in the near term. Crude’s slump is increasing the likelihood that producers will curb output, helping to stabilize prices. Fed Bank of St. Louis President James Bullard said today that inflation expectations have rebounded since October.

“The spike in oil prices acted as a catalyst,” David Meger, the director of metals trading at Vision Financial Markets in Chicago, said in a telephone interview. “There was a lot of fund buying.”

Gold futures for December delivery rose 2.1 percent to settle at $1,185.60 at 1:38 p.m. on the Comex in New York. Earlier, the price reached $1,192.90, the highest for a most-active contract since Oct. 31. In two days, the price climbed 2.3 percent, the most since June 20.

Total volume rose to an estimated 315,276 contracts, the seventh time this year trading topped 300,000. Yesterday, aggregate open interest climbed to the highest since May 22, 2013.

Technical ‘Momentum’

More than 10,000 contracts for December delivery traded around 10:06 a.m., with prices jumping about 1.5 percent within six minutes and erasing earlier declines. Today’s session low was $1,146 at 8:35 a.m.

“A lot of buy stops were triggered at $1,167.40, and that brought in the upward momentum,” Phil Streible, a senior commodity broker at R.J. O’Brien & Associates in Chicago, said in a telephone interview. “Today’s run-up was largely technical, and a few investors bought gold after oil prices showed some strength.”

OPEC ministers have stepped up their diplomatic visits before the group’s Nov. 27 meeting, potentially seeking a consensus on how to react to oil prices that have plunged to a four-year low. Gold reached a five-year low of $1,130.40 on Nov. 7 as energy prices tumbled and U.S. equities climbed to a record.

Forward Rates

The one-, two-, three- and six-month gold forward offered rates have turned negative, which is a sign of increased physical demand, Ade Odunsi, a portfolio manager at New York-based Treesdale Partners LLC, said in a telephone interview. A form of backwardation, when earlier prices are more expensive than for later dates, the negative rate signals that dealers are paid to lend metal against cash, rather than paying for the privilege.

A call option on gold, giving owners right to buy Dec. futures at $1,200, reached $12.50 after closing at an all-time low of $2.20 yesterday. Trading was an estimated 2,213 contracts, the second-most active option.

Silver futures for December delivery surged 4.4 percent to $16.314 an ounce, the biggest gain since Feb. 14. Earlier, the price fell as much as 2.4 percent. Trading doubled compared with the 100-day average, according to Bloomberg data.

On the New York Mercantile Exchange, platinum futures for January delivery rose 1.2 percent to $1,213.10 an ounce. Earlier, the price touched $1,177.50, the lowest since July 30, 2009.

Palladium futures for December delivery rose 0.1 percent to $771.35 an ounce.

This year, platinum has dropped 12 percent, while palladium climbed 7.4 percent. Gold has fallen 1.4 percent and silver has tumbled 16 percent.

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