Gold Advances in New York on China’s Inflation, Physical Demand

Gold climbed to the highest in almost a week in New York as a bigger-than-estimated increase in China’s inflation and lower prices spurred demand for the metal.

China’s consumer price index rose 2.7 percent from a year earlier, the National Bureau of Statistics said today, compared with a median estimate of 2.5 percent in a Bloomberg survey. Bullion rose 1.8 percent yesterday as the dollar retreated from a three-year high against six currencies. Gold’s drop this year spurred physical buying, according to T&K Futures & Options.

Gold slid 26 percent this year, wiping $61.7 billion from the value of gold exchange-traded product holdings, after some investors lost faith in the metal as a store of value as the Federal Reserve said it may slow bond buying this year. Prices also slumped because unprecedented stimulus failed to spur U.S. inflation. Expectations for gains in U.S. consumer prices, as measured by the break-even rate for 10-year Treasury Inflation Protected Securities, fell 15 percent this year.

“We have seen again some good demand and some fresh speculative buying on the back of the Chinese inflation figures,” David Govett, head of precious metals at Marex Spectron Group inLondon, said today in a report. “We are still seeing some good physical demand down at these levels.”

Bullion for August delivery gained 1 percent to $1,247.20 on the Comex in New York by 7:22 a.m., and earlier touched $1,258.70, the highest for a most active contract since July 3. Futures trading volume was 17 percent above the average in the past 100 days for this time of day, according to data compiled by Bloomberg. Gold for immediate delivery rose 1 percent to $1,249.38 an ounce in London.

Gold’s Record

Gold as much as doubled from 2008 to a record $1,923.70 in September 2011 as the U.S. central bank led nations in cutting interest rates and buying debt. Gold ETP holdings dropped to 1,993.8 metric tons yesterday, falling below 2,000 tons for the first time since May 2010, data compiled by Bloomberg show.

“The near-term outlook for gold remains downbeat,” Andrey Kryuchenkov, an analyst at VTB Capital in London, said today in a report. “Subdued inflation pressures in the U.S., a stronger dollar, reduced macro risks, the uncertainty over the quantitative-easing finishing line and expectations of a gradual gain in global growth rates are all likely to further deter market participants from committing to gold.”

Silver for September delivery rose 0.5 percent to $19.13 an ounce. It’s the worst performer in the Standard & Poor’s GSCI gauge of 24 commodities this year. Palladium for delivery the same month was little changed at $695.60 an ounce. Platinum for October delivery was little changed at $1,361.40.

Miners at Anglo American Platinum Ltd. (AMS), the world’s biggest producer, returned to work following a strike, Bongeka Lwana, a spokeswoman for the Johannesburg-based company, said in an e-mailed statement today. About 5,600 workers went on strike at two of the company’s mines in South Africa, demanding that suspended union officials were reinstated and planned job cuts scrapped.
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