Bullion is up 15% this year and set for 11th straight annual gain as investors seek safe haven
Gold rebounded from a seven-week low in London as concern about Europe’s
debt crisis spurred investors to buy the metal as a protection of wealth.
Gold slid 2.1 percent on Tuesday after the Federal Reserve said the US
economy is maintaining its expansion and refrained from taking new action to
bolster the economy. The dollar was near an 11-month high versus the euro amid
speculation the region’s sovereign-debt crisis is far from resolved. Gold
holdings in exchange-traded products are at an all-time high.
“With the dollar pushing higher, that suggests the market remains nervous
about Europe and the contagion it is causing,” William Adams, head of research
at Basemetals.com in London, wrote in a report on Wednesday. “Given the dire
situation in Europe and stresses in the monetary system, we feel the big
picture outlook for bullion remains bullish.”
Bullion for immediate delivery rose $7.58, or 0.5 percent, to $1,639.15 an
ounce by 9:18 a.m. in London. The metal touched $1,622.65 on Tuesday, the
lowest price since Oct. 21. Gold for February delivery slipped 1.3 percent to
$1,641.50 on the Comex in New York.
Bullion is up 15 percent this year and set for an 11th straight annual gain
as investors seek to diversify away from equities and some currencies. Dennis
Gartman, an economist who predicted the slump in commodities in 2008, on
Tuesday said the metal may decline to $1,475, extending the drop from the
record $1,921.15 set in September to more than 20 percent, the common
definition of a bear market.
Gold’s drop below its 100- and 50-day moving averages since last week took
the metal’s 14-day relative-strength index to 33.6 on Tuesday, near a level of
30 that indicates to some analysts who study technical charts that a climb in
prices may be imminent. Gold has traded above its 200-day moving average, now
at about $1,619, since the beginning of 2009.
German chancellor Angela Merkel told coalition lawmakers the €500bn ($652bn)
cap on Europe’s planned permanent bailout mechanism will stay in place, two
officials with knowledge of the discussion said. The Fed on Tuesday said the US
economy continues to expand even as the global economy slows.
“If you’re a gold investor now, you’re torn between two worlds: a recovering
US market and Europe falling to pieces,” Tom Price, an analyst at UBS AG, said
from Sydney. Investors are “trying to weigh out which one actually dominates
the gold price, and for at least the next week, the gold price is going to
struggle because of the improving US market outlook.”
Gold holdings in exchange-traded products rose 0.2 metric ton to an all-time
high of 2,360.7 tons on Tuesday, according to data compiled by Bloomberg.
Assets jumped 84.8 tons last month, the most since July.
Silver for immediate delivery rose 0.2 percent to $30.84 an ounce. Palladium
fell 0.5 percent to $641.25 an ounce. Platinum was 0.4 percent higher at $1,480
an ounce, after earlier on Wednesday falling to $1,466, the lowest level in
almost eight weeks.