BLBG: Gold Advances for a Second Day After IMF Forecasts Contraction
Gold gained for a second day in Asia as investors sought to preserve their wealth after the International Monetary Fund projected that the global economy will contract this year.
Bullion also climbed after U.S. stocks reversed a rally on concern government stress tests on banks will undermine confidence, and Morgan Stanley posted a wider-than-estimated loss. The IMF forecast a 1.3 percent drop in the world economy, compared with the 0.5 percent expansion estimated in January.
“If uncertainties around the global economy persist, gold may trade back above $900,” Chen Yonglin, an analyst at Citic Securities Co., said from Shanghai. “Gold’s fortunes will continue to be tied to the equities market for now.”
Bullion for immediate delivery rose as much as 0.6 percent to $894.80 an ounce, and traded at $894.10 at 9:03 a.m. in Singapore, extending yesterday’s 0.7 percent gain. The precious metal last closed at more than $900 on April 2.
IMF Chief Economist Olivier Blanchard said at a briefing in Washington that while a recovery will start early next year, a “return to normal” will take much longer. “This is not the time for complacency,” Blanchard said in a statement that accompanied the fund’s semi-annual World Economic Outlook.
Investment in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, stood unchanged for a third day at 1,105.98 metric tons yesterday.
Physical Demand
Gold also received support from an increase in physical demand, said Chen, referring to purchases intended for use, such as jewelry, rather than investment.
Gold imports by India, the largest consumer, may more than double this month from a year ago as a drop in prices revives demand before the nation’s biggest bullion festival next week, according to the Bombay Bullion Association.
Purchases may reach 50 metric tons from about 25 tons last year, said Harmesh Arora, vice president of the association. About 10 tons has been imported since April 1, Arora estimated on April 21.
Among other precious metals for immediate delivery, silver rose 1.6 percent to $12.50 an ounce, platinum fell 0.6 percent to $1,167 an ounce, and palladium was unchanged at $232.50 an ounce.
