Gold exceeded $1,300 an ounce for the first time since August on speculation slowing global growth will prompt central banks to boost stimulus, spurring haven demand.
Investors are adding to gold-backed funds at the fastest pace in three years. Open interest in New York futures and options is at the highest in eight weeks, and money managers are the most bullish since August. Silver also climbed on Wednesday in London in its best start to a year in three decades.
After shunning gold for two years, investors are returning to the metal amid concern U.S. growth won’t be enough to offset weakness in foreign economies. Policy makers in Europe and Asia are being challenged to come up with new ways to spur growth amid prolonged below-target inflation. Bullion rose 70 percent from December 2008 to June 2011 as the Federal Reserve pumped more than $2 trillion into the financial system.
“Capital is flowing into safe assets such as gold,” said Mark To, head of research at Wing Fung Financial Group, a trader and refiner in Hong Kong. “The market is
currently full of news that’s supportive of higher gold prices -- expectations for lower global growth, uncertainty around what the ECB will do and more stimulus around the world.”
Bullion for immediate delivery climbed as much as 0.6 percent to $1,303.63 an ounce and traded at $1,300.28 by 10:24 a.m. in London, according to Bloomberg generic pricing. Futures for February delivery on the Comex in New York gained 0.5 percent to $1,300.50.
Prices Gain
Prices jumped 4.7 percent in London last week, the most since 2013, as investors sought safety from turmoil in currency markets after the Swiss central bank unexpectedly abandoned the franc’s cap against the euro. The metal climbed 9.8 percent this year. The International Monetary Fund and the World Bank cut outlooks for global growth this month, even as they upgraded estimates for American expansion.While diverging monetary policies have boosted the dollar, the slump in commodities and weakness in foreign economies have raised speculation the Fed may hold off raising rates. This can increase gold’s appeal as a store of value as the metal generally gives investors returns only through price gains.
The European Central Bank is expected to announce asset purchases on Jan. 22, further weakening the common currency that’s already near an 11-year low, while the Bank of Japan today cut its inflation forecast and kept its unprecedented monetary easing unchanged. Priced in euros, gold reached the highest since 2013.
Investors bought 37.9 metric tons through exchange-traded products in the three sessions through Jan. 20, the most since 2011, data compiled by Bloomberg show. They’re holding 1,633.5 tons, the most since Nov. 6. Assets fell to the lowest since 2009 on Jan. 14.
Goldman, SocGen
Analysts are split on the 2015 outlook. Goldman Sachs Group Inc. and Societe Generale SA expect the metal to fall, with the Paris-based bank forecasting prices to reach $1,000 by Dec. 31, it said in a Jan. 14 report. Standard Chartered Plc expects the metal to rally to $1,320 by the fourth quarter, it said Jan. 20.Gold fell 1.4 percent last year after a 28 percent loss in 2013, marking the first consecutive annual slide since 2000. A surge in equities and an improving U.S. economy prompted some investors to lose faith in the metal. The Standard & Poor’s 500 Index of shares is heading for a second monthly drop, the longest slump since 2012.
The metal’s rally has taken its 14-day relative-strength index above 70, signaling to some traders and analysts who study charts that prices may be poised to retreat.
Silver climbed as much as 1.9 percent to the highest since September and was last at $18.213 an ounce. It’s up 16 percent so far this month in the best start to a January since 1983. Platinum was little changed and palladium rose 0.4 percent.
“It’s too early to decide if gold is really out of the downtrend,” said Lance Roberts, who helps oversee $600 million as chief strategist for STA Wealth in Houston. “What has changed over the past few months is that fear is coming back. Some investors are buying gold to hedge against uncertainties.”
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