Gold Rebounds From Worst Week in Years on ETF Bargain Hunting

  • Holdings of gold-backed ETFs rise to highest level since 2013
  • Goldman sees buying opportunity at prices below $1,250

Morning Meeting: Gold's U.S. Election Volatility

Gold futures rebounded from the biggest weekly drop in more than three years as investors jumped into exchange-traded funds backed by the metal, lifting global holdings to the highest since 2013.

Holdings of ETFs backed by gold rose by 9.1 metric tons to 2,046.4 tons on Friday. Assets in SPDR Gold Shares, the world’s biggest gold ETF backed, surged to the highest since mid-August.

Bullion dropped 5 percent last week as signs of improving U.S. economic data boosted bets that the Federal Reserve will raise interest rates this year, reducing the metal’s competitiveness against interest-bearing assets such as bonds. Gold’s 14-day relative-strength index, a gauge of momentum, fell below the level of 30 that signals to analysts who study charts that prices may rebound.

“When you see prices get that low you’re going to have people come in and start buying gold ETFs and physical gold,” Phil Streible, a senior market strategist at RJO Futures in Chicago, said in a telephone interview. “Investors are buying here at a discount thinking prices can come back.”’

Gold futures for December delivery gained 0.7 percent to settle at $1,260.40 an ounce at 1:40 p.m. on the Comex in New York, the first gain in more than a week, and the biggest increase in two weeks. Gold climbed 25 percent in the first half of the year as a slowdown in global growth boosted the metal’s appeal as a haven.

Goldman Sachs Group Inc. has said that a drop in prices significantly below $1,250 would present investors with a “strategic buying opportunity,” with the metal offering protection against risks to global growth and limits to central banks’ effectiveness.

As prices fell last week, traders cut bets on a rally by the most since late May. The net-long position in gold futures and options fell 22 percent to 205,176 for the week to Oct. 4, according to Commodity Futures Trading Commission data released three days later.

In other metals:

  • Silver futures for December delivery added 1.6 percent to $17.659 an ounce on the Comex, the biggest gain since Sept. 22.
  • On the New York Mercantile Exchange, platinum and palladium climbed.
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