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BookmarkGold rose in London for a second day after the Federal Reserve’s stimulus boosted demand for metals. Platinum advanced.
The Federal Open Market Committee said it will “await more evidence” for sustained economic recovery before reducing its $85 billion in monthly stimulus, according to a statement yesterday. Gold slid 18 percent this year on speculation that the Fed would taper support programs that helped the precious metal cap a 12-year bull run in 2012. Bullion rallied yesterday as the Standard & Poor’s 500 Index of equities rose to a record.
“Gold prices joined a broader commodity and equity markets risk-on rally as investors cheered the FOMC’s persistent accommodative stance,” Andrey Kryuchenkov, an analyst at VTB Capital in London, said in an e-mailed report. “For the rally to be sustained for a longer period, we would need to see evidence of physical flows entering the market.”
Gold for immediate delivery rose 0.2 percent to $1,366.12 an ounce by 12:52 p.m. in London. Yesterday’s 4.1 percent jump was the biggest since June 1, 2012. Futures for December delivery on the Comex in New York climbed 4.5 percent to $1,366 an ounces. Prices settled 0.1 percent lower yesterday.
Analysts Surprised
The Standard & Poor’s GSCI gauge of 24 commodities rose 1 percent today, extending yesterday’s 1.5 percent gain, the biggest in three weeks. The dollar fell to a seven-month low against a basket of 10 currencies today.
Goldman Sachs Group Inc. said the Fed’s decision “leaves risks to gold prices as skewed to the upside in the near-term.” The bank restated its prediction that prices will resume a drop into 2014 on U.S. economic growth and less accommodative monetary policy, analysts Damien Courvalin and Jeffrey Currie wrote in a note dated yesterday.
Analysts were divided on the amount by which policy makers would scale back monthly asset purchases. Among 64 economists surveyed by Bloomberg News before the announcement, 33 predicted the Fed would reduce buying of Treasuries by $5 billion or less, while 31 forecast a cut of $10 billion or more. The Fed said yesterday that it needs more evidence of lasting improvement in the economy and warned that an increase in interest rates threatens to curb the expansion.
ETPs, Miners
Gold, which reached a record $1,921.15 in London on Sept. 6, 2011, surged 70 percent from the end of December 2008 to June 2011 as the Fed pumped more than $2 trillion into the financial system by purchasing debt. Prices fell 14 percent in two days through April 15, the worst slide since 1983, before rebounding as the rout spurred coin and jewelry demand from the U.S. toChina.
Holdings in ETPs backed by the metal have fallen 26 percent from an all-time high of 2,632.5 metric tons on Dec. 20, erasing more than $54 billion of market value. Mining companies reported at least $26 billion in writedowns this year as prices fell.
Silver for immediate delivery was little changed at $22.9755 an ounce in London after soaring 5.5 percent yesterday. Futures for December delivery were at 22.98 an ounce in New York. Platinum rose 0.3 percent to $1,469.75 an ounce in London while October futures were at $1,470. Spot palladium was little changed at $718.65 an ounce and December futures were at $719.50 an ounce.
