Gold Advances to 16-Week High Amid Signs of Weaker U.S. Growth

New York (Feb 24) Gold and silver rose to the highest in more than 16 weeks in New York on speculation that weakening U.S. growth and turmoil in Ukraine will boost haven demand.

The Federal Reserve Bank of Chicago’s national index for January was at minus 0.39, compared with analysts’ median estimate of minus 0.2. A below zero reading indicates below- trend-growth in the national economy. Ukraine’s interim government said the country needs $35 billion of financial assistance to avoid default as it issued an arrest warrant for fleeing ex-President Viktor Yanukovych.

“There is some safe-haven buying because of continued signs of slowing growth in the U.S.,” Tom Power, a senior commodity broker at R.J. O’Brien & Associates in Chicago, said in a telephone interview. “Concerns about Ukraine remain.”

Gold futures for April delivery climbed 1 percent to $1,336.60 an ounce at 10:44 a.m. on the Comex in New York after earlier today trading at $1,338.20, the highest for a most- active contract since Oct. 31.

After slumping by the most since 1981 last year, gold rose 11 percent since the end of December and is headed for a second monthly gain. Bullion prices rebounded this year even as the Federal Reserve continued slowing stimulus.

“The market is only reacting over U.S. figures,” Bernard Sin, head of currency and metal trading at bullion refiner MKS (Switzerland) SA in Geneva, said today by phone. “The political situation has been rather tense, there’s some speculative interest in going into gold as a safe haven.”

Bullion surged 70 percent from December 2008 to June 2011 as the central bank pumped more than $2 trillion into the financial system.

CFTC Data

Hedge funds and other money managers increased their net- long gold position by 31 percent to a 16-week high of 90,942 contracts in the week to Feb. 18, U.S. Commodity Futures Trading Commission data show. Holdings in gold-backed exchange-traded products rose 3 metric tons to 1,739.2 tons on Feb. 21, data compiled by Bloomberg show. They fell to the lowest level since October 2009 on Feb. 19.

Analysts are split on the outlook for prices. Gold has lost its luster and will decline to $1,011 an ounce in December as the Federal Reserve tapers and the dollar strengthens, Westpac Banking Corp. said Feb. 20. Goldman Sachs Group Inc. sees prices dropping to $1,050 by the end of the year. UBS AG said Feb. 19 that the metal has “started to shed its stigma,” and increased its 2014 forecast to $1,300 from $1,200.

Silver futures for delivery in May rose 1.3 percent to $22.10 an ounce, after climbing to $22.215, the highest since Oct. 31.

Source: Bloomberg