BLBG: Gold Climbs as Investors Seek Safety From Sliding Stock Markets
Gold rose after a slide in U.S. equity markets sparked demand for the precious metal as a store of value. Silver also gained.
U.S. stocks halted a four-day advance as more companies posted poor earnings and jobless claims rose to a record last month. Profits have declined 42 percent for the 187 companies in the Standard & Poor’s 500 Index that have reported quarterly results since Jan. 12. Gold rose 5.5 percent last year as S&P 500 sank 38 percent.
“We’re seeing a bit of bounce in gold because of what the equity markets are doing now,” said Matt Zeman, a metals trader at LaSalle Futures Group in Chicago. “Investors are backing out of equities and going to gold and other assets that are viewed as safer.”
Gold futures for April delivery rose $16.50, or 1.9 percent, to $906.50 an ounce on the New York Mercantile Exchange’s Comex division, after earlier dropping to $875.70, the lowest since Jan. 23. The contract fell 2.3 percent in the previous two sessions.
Silver futures for March delivery rose 18.2 cents, or 1.5 percent, to $12.145 an ounce in New York.
The S&P 500 dropped as much as 3.2 percent after government reports showed U.S. durable goods orders fell for a fifth month in December and the number of Americans receiving unemployment benefits jumped to a record in mid-January, raising speculation that the recession will deepen.
The Federal Reserve yesterday left the benchmark bank- lending rate as low as zero and said it’s prepared to purchase longer-term Treasuries to help revive credit markets while keeping borrowing costs low.
Dollar Hedging
“We’re seeing gold buyers come back in and slap on the anti-dollar hedge,” said Ralph Preston, a futures analyst at Heritage West Futures Inc. in San Diego. “The Fed is running out of ammunition. They can’t take rates any lower, so they’re going to start buying Treasuries to push down yields.”
Investment in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, has remained at a record 832.9 metric tons since Jan. 26.
Still, gold’s gains may be limited if passage of the $819 billion stimulus package being considered by Congress rallies equity markets, said Tom Pawlicki, an analyst at MF Global Ltd. in Chicago.
“Trade will be sensitive to the inflationary aspects of the stimulus plan making its way through Congress,” said Pawlicki. “The risk is if the stimulus causes the stock market to rise, which could draw investment away from gold.”
