Gold Gains Most in Three Weeks on Higher Chinese Demand

Gold futures advanced the most in three weeks as demand surged in China, the world’s biggest consumer of the precious metal after India. Silver rallied to a seven-week high.

Domestic purchases of gold jumped 54 percent to 706.4 metric tons in the first half of 2013, compared with a year earlier, the China Gold Association said today. Buying of gold-bar purchases surged 87 percent and jewelry demand increased 44 percent. Last month, gold prices jumped 7.3 percent, partly on increased physical buying.

“Physical demand, especially out of China, continues to support prices,” Michael Smith, the president of T&K Futures & Options in Port St. Lucie, Florida, said in a telephone interview. “We are seeing bullish sentiment across the precious-metal market today.”

Gold futures for December delivery rose 2.1 percent to $1,339.70 an ounce on the Comex in New York at 10:18 a.m., heading for the biggest gain for a most-active contract since July 22. Earlier, prices touched $1,343.70, the highest since July 24.

Holdings in the SPDR Gold Trust, the biggest exchange-traded product backed by the precious metal, rose 1.8 tons to 911.13 tons on Aug. 9, the first increase since June 10, data compiled by Bloomberg show. Assets are down 33 percent this year.

“What we need to maintain the current gold price level is actually inflows,” Dominic Schnider, the head of commodities research at UBS AG’s wealth-management unit in Singapore, said on Bloomberg Television today, predicting lower prices in the next three to six months. “What’s really saved us so far on the consumer side in emerging markets has been China.”

Silver futures for September delivery climbed 4.3 percent to $21.28 an ounce in New York, after reaching $21.335, the highest since June 19.

Trading was 51 percent higher than the average for the past 100 days for this time of day, according to data compiled by Bloomberg.

Source