Gold Rallies in Longest Run Since 2011 as Equities, Dollar Slip

  • Spot gold set for 8th gain in longest rally since July 2011
  • Goldman says U.S. interest-rate increases to halt advance

Gold Bulls, Oil Bears: Keeping Up With Commodities

Gold for immediate delivery rebounded, heading for the longest rally in more than four years, as reeling equity markets and a declining dollar boosted demand for the metal as an alternative asset.

U.S. stocks declined, with the Standard & Poor’s 500 Index near the lowest since April 2014, as energy shares extended losses. The dollar fell for a second straight day against a basket of 10 currencies. Bullion, which topped $1,200 an ounce on Monday for the first time since June, was down as much as 0.3 percent earlier after Goldman Sachs Group Inc. predicted recent gains won’t last.

Gold has climbed 12 percent in 2016 in its best start since 1980, as mounting concerns over global economic growth boost demand for haven assets and spur speculation that the Federal Reserve will hold off on raising U.S. interest rates this year. Fed Chair Janet Yellen is scheduled to appear before the U.S. House Financial Services Committee on Wednesday, and will address the Senate Banking Committee the next day.

“There is a big flight to safety right now, going into gold,” Bob Haberkorn, a senior market strategist at RJO Futures in Chicago, said in telephone interview. “The dollar is playing into it as well, but it’s mostly jitters due to the global equity market. There’s not a lot of bright spots out there right now, with the exception to gold.”

Gold for immediate delivery climbed 0.2 percent to $1,191.43 an ounce at 2:50 p.m. in New York. The metal headed for an eighth straight gain, the longest rally since July 2011. Gold futures for April delivery gained 0.1 percent to settle at $1,198.60 on the Comex in New York, a fifth straight gain.

Higher interest rates reduce the appeal of precious metals, which don’t pay interest. Goldman forecasts losses for the metal over the coming year as the Fed increases U.S. interest rates no fewer than three times. The U.S. will grow above-trend this year, according to the Goldman report, and the bank estimates bullion will trade at $1,000 an ounce by the end of 2016.

“We think that a major Fed speaker such as Yellen is going to reiterate being data dependent and pressing ahead for the rate hikes,” when she speaks to U.S. lawmakers this week, George Gero, a vice president of global futures at RBC Capital Markets in New York, said in a telephone interview.

Some traders are betting the rally has further to go. Eight of the 10 most-traded gold options in New York on Monday were bets on further price gains. Holdings of the metal in exchange-traded funds increased for a 16th straight day on Monday, the longest run since 2012..

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