Gold Heads for Biggest Weekly Gain Since August on Haven Demand

Gold headed for the biggest weekly advance since August as concern that the U.S. economy may be slowing down increased demand for precious metals as a haven. Silver was set for the longest rally since March 2008.

U.S. factory production unexpectedly declined in January by the most since May 2009, figures from the Federal Reserve showed. Bullion is heading for the eighth straight day of gains, extending the longest rally since July 2011, and prices today are poised to close above the 200-day moving average for the first time in a year.

Gold jumped 9.5 percent this year, rebounding from a 28 percent plunge in 2013 that was the biggest annual decline since 1981. Billionaires John Paulson and George Soros sold metal holdings last year as a rally in equities and tame inflation spurred some investors to lose their faith in bullion as a store of value. Fed Chairman Janet Yellen said Feb. 11 that the recovery in the U.S. labor market is “far from complete.”

“Gold has broken the downtrend, and we are going to see some buying come in,” Lance Roberts, who oversees $600 million as chief executive officer of STA Wealth in Houston, said in a telephone interview. “Yellen and the Fed will definitely not take away the stimulus since it is becoming increasingly clear that the economy is not healthy.”

Gold futures for April delivery rose 1.3 percent to $1,316.80 an ounce at 12:08 p.m. on the Comex in New York. Prices headed for a 4.3 percent weekly gain, the biggest such increase since the week ended Aug. 16.

The U.S. central bank cut monthly bond buying by $10 billion at each of its past two meetings, leaving purchases at $65 billion. Yellen said this week that asset purchases aren’t on a “pre-set course.” Gold jumped 70 percent from December 2008 to June 2011 as the central bank pumped more than $2 trillion into the financial system, raising inflation concerns.

200-Day Average

The metal’s 200-day moving average is near $1,309. A close above the measure will signal prices may rise to $1,600 for the first time since April, said Dave Lutz, the head of exchange-traded fund trading and strategy at Stifel Nicolaus & Co. in Baltimore.

“Clearly, there is a shift in sentiment, and we are seeing more buying in gold,” said Lutz, who correctly predicted in Dec. 2012 that prices were heading for declines using technical analysis based on the 200-day moving average.

Gold has traded above the 100-day moving average since Feb. 10, and climbed above the 50-day measure for every day since Jan. 23. Last month, prices rose 3.1 percent, the first advance since August.

SPDR Holdings

Assets in the SPDR Gold Trust, the biggest exchange-traded product backed by bullion, rose to 806.35 metric tons yesterday, the highest since Dec. 20. Holdings are headed for a third weekly advance, after tumbling 41 percent in 2013.

Paulson, the largest holder in the SPDR Gold fund, maintained his stake in the third quarter after cutting his investment by more than half in the the prior three months, according to government filings. Billionaire Soros sold his entire stake in the SPDR Gold Trust in the second quarter. Fourth-quarter filings are scheduled for today.

Gold’s advance this year hasn’t deterred analysts at Goldman Sachs Group Inc., who this week restated a forecast for lower prices. The metal will drop to $1,050 by the end of the year, analysts led by Jeffrey Currie said in a report, citing expectations for improving U.S. growth.

Barrick Gold Corp, the top producer, took $2.82 billion of writedowns in the fourth quarter, bringing the total in 2013 to $11.5 billion. Goldcorp, the second-largest, reported $443 million of impairments.

Silver futures for March delivery jumped 4.1 percent to $21.225 an ounce in New York, after touching $21.295, the highest for a most-active contract since Nov. 12. Prices have risen for 10 straight sessions and are up 9.4 percent this year after tumbling 36 percent in 2013.

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