Gold Rises to 3-Month High on Haven Demand as Silver Extends Run

Gold advanced to the highest level in more than three months as speculation the U.S. economic recovery will slow spurred demand for a haven. Silver headed for the longest run of gains since at least 1968.

Bullion climbed 4.1 percent last week, the most since the period ended Aug. 16. U.S. factory production unexpectedly declined in January by the most since May 2009, according to a report released on Feb. 14. Gold will establish a new range above $1,300 an ounce and U.S. investors are becoming friendlier to the metal, UBS AG said in a report today.

Bullion tumbled the most since 1981 last year after some investors lost faith in the metal as a store of value and as U.S. policy makers signaled they will slow stimulus. Gold rebounded 10 percent this year as emerging-market equities and currencies weakened and lower prices of the metal spurred more physical demand, particularly from Asia.

“It is the insurance product against further emerging market turmoil, more bad U.S. data, potentially too frothy equity markets and unforeseen market shocks,” UBS analysts in London, who met with U.S. clients last week, wrote in the report. “With positioning so light and the sentiment turn in gold’s favor so recent, we expect that gold will remain bid.”

Bullion for immediate delivery rose 0.7 percent to $1,327.45 an ounce by 1:50 p.m. in London. It reached $1,330.03, the highest since Oct. 31. Gold for April delivery gained 0.7 percent to $1,327.50 in electronic trading on the Comex in New York, where futures trading volume was 20 percent below the average for the past 100 days for this time of day, data compiled by Bloomberg showed.

Markets in the U.S. will be closed for a holiday today.

Federal Reserve

The Federal Reserve’s monthly bond purchases have been reduced to $65 billion after cuts of $10 billion at each of its past two meetings. Fed Chair Janet Yellen said last week that debt buying isn’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.

Holdings in gold-backed exchange-traded products rose 3.2 metric tons last week, the biggest weekly gain since December 2012, data compiled by Bloomberg show. Assets reached the lowest since October 2009 last month. Billionaire John Paulson, the largest investor in the SPDR Gold Trust, the biggest gold ETP, kept his stake in the product unchanged in the fourth quarter, according to a government filing Feb. 14.

Silver for immediate delivery rose 1.3 percent to $21.787 an ounce. It reached $21.9791, the highest since Nov. 7, and is set for a 12th successive gain in the longest run since at least 1968. One ounce of gold bought as few as 60.5213 ounces of silver today, the least since Jan. 2.

Palladium Rises

Palladium added 0.3 percent to $739.75 an ounce, after climbing to a three-week high of $742. It’s up for a ninth day in the longest run since September 2012. Platinum advanced 0.2 percent to $1,431.19 an ounce. Prices reached a three-week high of $1,434.25 earlier today.

More than 70,000 Association of Mineworkers and Construction Union members have been on strike since Jan. 23 at Anglo American Platinum Ltd., Impala Platinum Holdings Ltd. and Lonmin Plc mines in South Africa. The country accounts for about 70 percent of global platinum production.

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