BLBG: Gold Trades Little Changed as Climb Above $900 Increases Supply
Gold traded little changed in Asia as the metal’s advance above $900 an ounce increased supply from scrap and prompted some investors to sell.
Holdings in the SPDR Gold Trust, the largest exchange-traded fund backed by bullion, rose to a record 859.49 metric tons yesterday as financial turmoil prompted investors to chase rising prices. Weakening currencies may help gold reach $1,000 within three months, Goldman Sachs Group Inc. said.
“Investors still see gold as a safe haven, as seen by the rise in investments in ETFs,” Dick Poon, manager of the precious metals trading desk at Heraeus Ltd., said from Hong Kong today. “However, at such high prices we’re seeing a lot of scrap supply emerging, which is keeping gold rallies in check.”
Bullion for immediate delivery dropped as much as 0.3 percent to $903 an ounce, and traded at $904.62 at 11:51 a.m. in Singapore. It reached a 16-week high of $929.70 on Jan. 30.
Gold for April delivery was up 0.4 percent at $906 in after- hours electronic trading on the Comex division of the New York Mercantile Exchange.. Gold on the Tokyo Commodity Exchange rose 0.9 percent to 2,606 yen a gram ($907 an ounce) at the 11 a.m. local time break.
Investors often buy gold as a store of value when the U.S. dollar is weak. The dollar gained against the euro today on speculation the slump in Eastern Europe will deepen the region’s recession, increasing the likelihood of further rate cuts by the European Central Bank.
‘Last Resort’
“All currencies have become perceived as increasingly risky, with the recent U.S. dollar rally being driven more by declining confidence in other currencies, leaving gold as the currency of last resort,” Goldman’s analysts Jeffrey Currie and David Greely said in a report yesterday.
While high prices are boosting scrap supplies, most of that metal is being absorbed by the ETF market, Poon said.
“That’s why we think gold will continue to consolidate at these levels for the first quarter of the year,” he said.
Goldman expects gold to trade at $950 an ounce in six months and $825 an ounce in 12 months, up from earlier forecasts of $785 and $795 respectively.
Analysts at UBS AG yesterday raised their average gold forecast for this year by 43 percent to $1,000 an ounce, while those at Morgan Stanley Jan. 21 increased their 2009 estimate by 20 percent to $900 an ounce.
Among other precious metals for immediate delivery, silver fell 0.5 percent to $12.465 an ounce, platinum was little changed at $966.75 an ounce and palladium gained 0.3 percent to $197 an ounce.
