.Gold Prices May Rise in London as Dollar’s Decline Spurs Investor Demand
Yesterday the dollar rallied and gold dropped amid speculation that any monetary program, or quantitative easing, to boost the U.S. economy will be gradual. Gold usually moves inversely to the greenback, which today declined against the euro. Bullion is trading 4.4 percent below a record $1,387.35 an ounce reached on Oct. 14.
“If the dollar stays weak, it probably is supportive” for gold, Peter Fertig, owner of Quantitative Commodity Research Ltd. in Hainburg, Germany, said today by phone. “Some gold investors are getting a bit more cautious on the magnitude of quantitative easing, that it could be less than the market had already priced in.”
Immediate-delivery bullion rose $2.25, or 0.2 percent, to $1,327.70 an ounce at 11:51 a.m. in London. Prices swung between a drop of 0.2 percent and a gain of 0.3 percent. The metal for December delivery was 0.3 percent higher at $1,326.20 on the Comex in New York. Futures reached a record $1,388.10 on Oct. 14.
Bullion rose to $1,326.50 an ounce in the morning “fixing” in London, used by some mining companies to sell output, from $1,324.50 at yesterday’s afternoon fixing. The dollar fell as much as 0.6 percent against the euro today.
Gold, up 21 percent this year, is heading for a 10th annual gain, the longest winning streak since at least 1920. Bullion has outperformed global equities, Treasuries and most industrial metals, prompting record investment in gold-backed exchange- traded products. Concern about possible further monetary easing in the U.S. has supported prices.
The Federal Reserve has asked bond dealers and investors for projections of central bank asset purchases over the next six months, along with the likely effect on yields, according to a survey obtained by Bloomberg News.
Estimates for the size of the asset-purchase program range from $1 trillion at Bank of America-Merrill Lynch to $2 trillion at Goldman Sachs Group Inc. Economists at both firms agree the Fed will likely start by announcing a $500 billion plan after policy makers’ Nov. 2-3 meeting.
Gold “quite likely” may decline below $1,300 an ounce in the short term, UBS AG analyst Edel Tully said today in an e- mailed report.
“Gold continues to trade defensively as quantitative easing expectations are ratcheted back,” Tully said. “With year-end approaching and multiple risks on the immediate horizon, there is a danger that increasing numbers of investors will bank profits for the year.”
Gold assets in ETPs declined 0.98 metric ton to 2,095.15 tons yesterday, the ninth consecutive drop, according to data compiled by Bloomberg from 10 providers. Holdings are up 17 percent this year and reached a record 2,104.65 tons on Oct. 14.
Bullion trading may remain “choppy” before the Fed meeting, said Ben Westmore, a minerals and energy economist at National Australia Bank Ltd. in Melbourne.
China should buy gold to diversify its foreign-exchange reserves, International Business Daily, a newspaper affiliated with the Ministry of Commerce, said yesterday. The country should raise bullion holdings if it wants to “internationalize” its currency, the paper said, citing Meng Qingfa, a researcher at the China Chamber of International Commerce.
Silver for immediate delivery in London was little changed at $23.5988 an ounce. Platinum added 0.1 percent to $1,682.50 an ounce. Palladium was 1.1 percent higher at $623.50 after yesterday reaching a nine-year high of $637.75.