Gold Advances Most in Two Weeks as Crude Rebound Revives Demand

San Francisco (Dec 1)  Gold futures climbed the most in two weeks as a gain for oil prices revived demand for the metal as a store of value.

Crude futures in New York rose as much as 2.3 percent, rebounding from a five-year low. Bullion fell to the lowest since 2010 last month, partly on waning demand for a hedge against inflation. Federal Reserve officials have warned that lower energy prices could hold down consumer costs in the near term.

Gold earlier fell to a three-week low after Swiss voters rejected a measure that would’ve required their central bank to hold a portion of its assets in bullion. Prices also rebounded as Moody’s Investors Service cut Japan’s credit rating and U.S. holiday spending slowed, fueling concern that global growth will falter. Oil’s advance today is the first gain in more than a week.

“What’s driving the gold market here is crude,” Tai Wong, the director of commodity products trading at BMO Capital Markets Corp. in New York, said in a telephone interview. “The move is snowballing as recent short covering and micro-term momentum buyers go long.”

On the Comex, gold futures for February delivery jumped 1.8 percent to $1,196.50 an ounce at 10:44 a.m. in New York, headed for the biggest gain since Nov. 14.

Trading was more than double the 100-day average for this time of day.

The downgrade for Japan and slower U.S. retail sales “suggest lower interest rates and a flight to quality, and that’s good for alternative assets like gold and silver,” Mike McGlone, the research director at ETF Securities U.S. in New York, said in a telephone interview.

Silver futures for March delivery jumped as much as 5.2 percent on the Comex, the biggest intraday day advance since September 2013.

Source:  Bloomberg