Gold Holds Below Three-Week High as Investors Weigh Demand, Fed
London (Jan 7) Gold held below a three-week high in London as investors weighed signs of increased physical demand against the outlook for less U.S. stimulus.
Bullion reached $1,248.51 an ounce yesterday, the highest since Dec. 16. Gold rose as much as 5.6 percent from a six-month low set Dec. 31 as investors closed out bets on lower prices ahead of commodity index re-balancing this week and increased physical demand, UBS AG wrote in a report today. The premium for immediate delivery in China was about $23.34 an ounce today, from $15.87 on Jan. 3 and $11.47 a week ago.
Gold tumbled 28 percent last year, the most since 1981, as some investors lost faith in the metal as a store of value amid an equity rally and as inflation failed to accelerate. The Federal Reserve on Dec. 18 said it would reduce its monthly U.S. bond purchases to $75 billion from $85 billion, with minutes of the meeting to be released tomorrow.
“The physical demand seen over the last week has slowed, but is still there and is keeping the market supported for the time being,” David Govett, the head of precious metals at Marex Spectron Group in London, wrote today in a report. “We await the release of the FOMC minutes tomorrow for some clues as to when the next round of tapering might be.”
Gold for immediate delivery was little changed at $1,239.22 an ounce by 9:47 a.m. in London. Bullion for February delivery was little changed at $1,238.50 on the Comex in New York, where futures trading volume was 14 percent below the average for the past 100 days for this time of day, data compiled by Bloomberg showed. Futures dropped yesterday by more than $30 in about a minute, spurring a 10-second trading halt.
Index Re-balancing
Re-balancing of the Dow Jones-UBS commodity index may result in 1.49 million ounces of gold demand this week and 44.27 million ounces of silver buying, UBS estimates.
China probably overtook India as the world’s biggest bullion consumer last year, the World Gold Council has said. Volumes traded today and yesterday for the benchmark contract on the Shanghai Gold Exchange averaged about 64 percent more than in the past month, data compiled by Bloomberg show.
Holdings in gold-backed exchange-traded products fell 0.3 metric ton to 1,755.3 tons yesterday, the lowest since October 2009, data compiled by Bloomberg show. Speculators’ short positions, or bets on lower prices, are within 10 percent of a record set in July, U.S. Commodity Futures Trading Commission data show.
Silver for immediate delivery fell 0.5 percent to $20.0747 an ounce in London. Platinum slipped 0.5 percent to $1,411 an ounce. Palladium declined 0.3 percent to $736.20 an ounce. It reached $739.55 today, the highest since Dec. 11.
