Gold Advances to Two-Week High as Russia Boosts ReservesDebarati Roy and Nicholas Larkin
Gold futures climbed to a two-week high topping $1,200 an ounce after Russia added to reserves, fueling speculation that a rebound in demand for bars, coins and jewelry will help stem this year’s drop.
Russia’s central bank bought about 150 metric tons of gold this year, Governor Elvira Nabiullina told lawmakers today. That’s almost double 2013 purchases of 77 tons, International Monetary Fund data show. It indicates the nation bought 35 tons since the end of September. Gold prices fell 3.3 percent last month, touching a four-year low of $1,130.40 on Nov. 7.
As futures head for the first two-year slump in more than a decade, buyers for physical metal are emerging. Central banks may increase purchases by as much as 22 percent in 2014, the World Gold Council estimates. In the third quarter, global demand fell to the lowest in almost five years.
“The fact that Russia is buying more gold instead of diversifying into another currency or buying more dollars is a big positive,” Frank Lesh, a trader at FuturePath Trading LLC in Chicago, said in a telephone interview.
Gold futures for December delivery climbed 1.1 percent to close at $1,197.10 at 1:52 p.m. on the Comex in New York. The price reached $1,204.10, the highest for a most-active contract since Oct. 30.
Prices also climbed today as the dollar fell against a basket of 10 currencies, boosting demand for alternative assets.
Gold has dropped 0.4 percent this year. Investors shunned the metal as the dollar rallied to a five-year high and U.S. equities climbed to a record. Demand has also waned as the Federal Reserve moves closer to raising interest rates.
Holdings in the SPDR Gold Trust, which was started 10 years ago today, dropped 75 metric tons this year after declining more than 550 tons in 2013. Assets in the fund, the world’s top exchange-traded product backed by the metal, are close to the lowest since 2008.
European Central Bank President Mario Draghi said yesterday that unconventional measures to stimulate the economy may include purchase of a variety of assets. The central bank might consider buying sovereign debt, gold, exchange-traded funds or real estate to counter a longer period of low inflation, said Yves Mersch, an executive board member.
“Physical demand is healthy,” Bernard Sin, the head of currency and metal trading at MKS (Switzerland) SA, a Geneva-based refiner, said in a telephone interview. “With the ECB comments, it could give support to the market.”
Holdings in global ETPs have dropped 8.2 percent in 2014. Last week, they touched lowest since 2009. Yesterday, assets rose for the first time this month, adding 1.6 tons to 1,619 tons. In China, trading of the Shanghai Gold Exchange’s benchmark spot contract was the highest since April 2013.
Silver futures for delivery in December rose 0.7 percent to $16.174 an ounce on the Comex.
On the New York Mercantile Exchange, platinum futures for January delivery rose 0.3 percent to $1,204.60 an ounce.
Palladium futures for December delivery advanced 1 percent to $776.70 an ounce, the biggest jump in a week