Gold Trades Near Highest Level Since September Before ECB Meets

By Glenys Sim Jan

Gold traded near a four-month high before European Central Bank policy makers meet to discuss introducing new stimulus as holdings in the largest exchange-traded product expanded the most since 2010.
Bullion for immediate delivery rose and fell at least 0.2 percent, and traded 0.4 percent lower at $1,275.09 an ounce at 3:50 p.m. in Singapore, according to Bloomberg generic pricing. The metal earlier climbed to $1,283, the highest level since Sept. 2, extending the biggest weekly gain since August 2013 as Switzerland’s surprise currency move on Jan. 15 roiled markets and boosted haven demand.
Gold’s rally sent the metal’s 14-day relative-strength index above the level of 70 that signals to some investors that prices may reverse. The Swiss National Bank ended the franc’s cap against the euro before a meeting on Jan. 22 which may see the ECB announce
asset purchases as Greece prepares for a Jan. 25 election. Assets in the SPDR Gold Trust rose 1.9 percent to 730.89 metric tons on Jan. 16, the biggest gain since May 2010.
“While gold tends to weaken with the euro, which is expected to fall further against the dollar as the ECB looks set to announce quantitative easing this week, gold also benefits from haven demand because of the uncertainties,” Huang Wei, an analyst at Huatai Great Wall Futures Co., wrote in a note. “We expect gold to be supported ahead of the elections in Greece and seasonal Lunar New Year demand.”

Commodity Slump

Gold rose 4.7 percent in the week to Jan. 16 in part as the Bloomberg Dollar Spot Index weakened for the first time in five weeks. A slump in commodity prices has raised speculation that the Federal Reserve may hold back from increasing its key rate, which has been kept near zero since 2008, as Jan. 16 data showed inflation held below the central bank’s 2 percent target.
Gold for February delivery traded at $1,275.10 an ounce on the Comex in New York from $1,276.90 on Jan. 16, when futures climbed to $1,282.40, the highest level since Sept. 2. U.S. markets are closed Jan. 19 for Martin Luther King Day.
Silver for immediate delivery declined 0.9 percent to $17.6322 an ounce, reversing an earlier advance to $18.0075, the highest level since Sept. 19. Prices surged 7.8 percent in the week to Jan. 16 for the biggest such gain since August 2013.
Spot platinum lost 0.4 percent to $1,262.45 an ounce, after prices rose on Jan. 16 to $1,272, the highest level since October. One ounce of platinum bought as few as 0.9882 ounces of gold on Jan. 19, the least since April 2013.
Palladium fell 0.8 percent to $752 an ounce, after dropping on Jan. 16 to $746.10, the lowest price since October. The metal retreated 5.6 percent in the week to Jan. 16 for the biggest such loss since September.