Gold Swings in London as Investors Weigh Fed Stimulus Outlook

London (Nov 15) Gold swung between gains and losses near the highest in almost a week in London as investors weighed the outlook for continued U.S. stimulus. Billionaire investor John Paulson maintained his holdings in the largest bullion- backed exchange-traded product.

Bullion advanced 1.5 percent in the previous two days and reached $1,294.42 an ounce yesterday, the most since Nov. 8, as Federal Reserve Chairman nominee Janet Yellen said she’s committed to promoting a strong economic recovery. The Bloomberg U.S. Dollar Index, a measure against 10 major currencies, was little changed after touching a one-week low yesterday.

Gold is set for the first annual drop in 13 years as some investors lost faith in the metal as a store of value and on speculation a strengthening economy will spur the Fed to slow debt purchases. Yellen said the central bank’s record-low key interest rate would remain low even after policy makers start to reduce monetary easing.

“The prospect that quantitative easing will not be reined in too soon has underpinned what strength there has been,” William Adams, an analyst at Fastmarkets.com in London, wrote today in a report. “It may take another bout of dollar weakness to provide lift.”

Gold for immediate delivery lost 0.3 percent to $1,283.01 by 9:38 a.m. in London. Prices rose as much as 0.3 percent and slipped as much as 0.4 percent. Bullion for December delivery declined 0.3 percent to $1,282.30 on the Comex in New York. Futures trading volume was 26 percent below average for the past 100 days for this time of day, data compiled by Bloomberg showed.

Yellen Comments

President Barack Obama nominated Yellen, the Fed’s vice chairman, last month to succeed Chairman Ben S. Bernanke, whose term expires Jan. 31. She commented in testimony yesterday to the Senate Banking Committee in Washington.

Holdings in gold-backed ETPs fell 2.3 metric tons to 1,871 tons yesterday, the lowest since April 2010, data compiled by Bloomberg show. Paulson & Co., the largest investor in the SPDR Gold Trust, held 10.23 million shares as of Sept. 30, unchanged from June 30, according to a government filing yesterday. He cut his stake in the product by 53 percent in the second quarter.

Silver for immediate delivery fell 0.7 percent to $20.6385 an ounce in London, taking its weekly drop to 4.1 percent, the most in two months. Palladium lost 0.4 percent to $735.88 an ounce. Platinum declined 0.2 percent to $1,442.90 an ounce.

A strike in South Africa called by the National Union of Mineworkers at Northam Platinum Ltd. over wages that began almost two weeks ago continues, said Ecliff Tantsi, chief negotiator for the NUM. The largest union at Anglo American Platinum Ltd.’s South African mines got permission to strike after a mediator failed to resolve a wage deadlock between the labor group and the world’s biggest producer of the metal.

South Africa accounts for about 72 percent of platinum mine supply and about 36 percent of palladium output, according to Barclays Plc.