Gold rose for a third straight day on speculation the recession will widen, boosting the appeal of the precious metal as a store of value. Silver also gained.
Investment in the SPDR Gold Trust, the biggest exchange-traded fund backed by bullion, has risen 33% this year to a record 1041.53 metric tons. Since the second quarter of 2007, banks worldwide have posted more than $US1.2 trillion in credit losses and writedowns. Before today, the Standard & Poor’s 500 Index slid 17% this year while gold gained 4.5%.
"Gold continues to resist any sustained decline, bouncing back quickly from any minor sell off," said Adrian Day, president of Adrian Day’s Asset Management in Annapolis, Maryland. "The fly in the ointment could be a sustained and strong, broad global stock-market rally which would calm some investors’ fears. There is little prospect of this on more than a short-term basis in my view, so we continue to be buyers on any dips."
Gold futures for April delivery rose $4.20, or 0.5%, to $US928.20 an ounce on the Comex division of the New York Mercantile Exchange. The price rose 3.1% in the previous two sessions.
Silver futures for May delivery climbed 20.2 cents, or 1.6%, to $13.145 an ounce. Silver has gained 15% this year through yesterday.
The SPDR Gold Trust’s holdings surpassed Switzerland’s yesterday, making the ETF the sixth-largest holder of bullion, based on data from the producer-funded World Gold Council. The US has the world’s largest gold reserves.
Gold’s gains were limited as the S&P headed for the biggest weekly increase since November. Gold rose as high as $US941.10 and fell as low as $US919.60.
The decline in price was a buying opportunity for investors like Day, who has been purchasing gold this week as the metal dropped to a one-month low $891.10 on March 10.
Gold may also benefit as an alternative to currencies. The Swiss National Bank said yesterday it was selling the franc, undermining the currency’s haven status.
China’s Premier Wen Jiabao said he is "worried" about the country’s holdings of US Treasuries and wants assurances that the investment is safe. China is the biggest holder of US debt.
"Should China or some other significant buyer of US debt announce that they will no longer buy US debt unless denominated in a non-US dollar currency, gold is going to the moon," said Tom Winmill, president of New York-based Midas Management.
In 2008, Treasuries returned 14% while gold gained 5.5% as investors sought a haven from financial turmoil. Treasuries slumped 2.9% this year through yesterday.
