Gold Advances as Investors Weigh Fed Outlook Against U.S. Data

London (Feb. 20)   Gold rose in London as investors weighed weaker U.S. data against the outlook for policy makers to further cut stimulus.

Bullion dropped 0.8 percent yesterday as minutes from the last meeting of Federal Reserve policy makers showed there’s not much chance they will scale back plans to reduce bond purchases. The metal rose 70 percent from December 2008 to June 2011 as economic growth slowed and the Fed pumped more than $2 trillion into the financial system and cut interest rates.

After slumping by the most since 1981 last year, gold rebounded 8.9 percent since the end of December as signs that the U.S. economy wasn’t recovering in line with expectations boosted demand for a haven. While U.S. unemployment fell last month to 6.6 percent, the lowest in more than five years, reports since last week showed retail sales and factory output unexpectedly dropped in January and housing starts slumped.

Bullion for immediate delivery added 0.1 percent to $1,313.42 an ounce by 8:51 a.m. in London. It fell to as low as $1,308.77 today after reaching $1,332.45 on Feb. 18, the highest since Oct. 31. Gold for April delivery lost 0.5 percent to $1,313.40 on the Comex in New York, where futures trading volume was 6 percent above the average for the past 100 days for this time of day, data compiled by Bloomberg showed.

Slowing physical demand from China “coupled with fears of the continuing tapering by the Fed, seems to be preventing market participants from building fresh long positions,” Abhishek Chinchalkar, an analyst at Mumbai-based AnandRathi Commodities Ltd., said in a report. “That said, the downside has also been restricted as data releases from the U.S. continued to disappoint.” 

Price Outlook

Gold has lost its luster and will decline to $1,011 in December as the Fed tapers and the dollar strengthens, Westpac Banking Corp. said in a report today. UBS AG said yesterday U.S. investors are turning more positive on gold and forecasts an average of $1,300 this year. It sees prices at $1,280 in one month and $1,350 in three months.

Several Fed policy makers said that in “the absence of an appreciable change in the economic outlook, there should be a clear presumption in favor” of continuing to trim bond purchases by $10 billion at each meeting, according to minutes of their January meeting released yesterday.

Holdings in gold-backed exchange-traded products declined 5.5 metric tons, the most since Jan. 23, to 1,735.4 tons yesterday, data compiled by Bloomberg show. That’s the lowest level since October 2009.

Silver for immediate delivery added 0.2 percent to $21.5666 an ounce. It reached $22.0448 yesterday, the highest since Nov. 6, before declining for the first time in 14 days. Palladium lost 0.1 percent to $732.70 an ounce. Platinum was little changed at $1,413.25 an ounce.

Source:  Economia & Fianza