BLBG:Gold Advances to Near Record as Slowing Growth Increases Demand
Gold advanced toward a record as concern that global economic growth may be slowing overshadowed a U.S. debt deal reached in time to avert a default, spurring demand for wealth protection.
Immediate-delivery gold, which reached an all-time high of $1,632.80 an ounce on July 29, gained 0.4 percent to $1,625.20 at 3 p.m. in Singapore. Holdings in exchange-traded products rose to 2,153.574 metric tons yesterday, the highest level ever, Bloomberg data show.
Manufacturing indexes from the U.S. to Europe and China declined in July, raising concern that the global recovery is losing momentum. Still, spot gold dropped for the first time in three days yesterday after the House of Representatives passed the measure to raise the U.S. debt limit and cut federal spending. The plan goes to the Senate for a final vote today.
“Increasing the debt ceiling is not going to make the debt go away, while the debt problems in Europe aren’t going to be resolved overnight, and we’re seeing all these getting reflected in the weaker economic numbers,” said Zhang Yingying, an analyst at Galaxy Futures Co., a brokerage that’s 16.7 percent owned by the Royal Bank of Scotland Group Plc.
Gold for December delivery in New York rose 0.3 percent to $1,627 an ounce, after futures reached a record $1,637.50 on July 29. Spot silver gained 1.2 percent to $39.7588 an ounce.
The Institute for Supply Management said yesterday that its manufacturing index dropped to 50.9 last month from 55.3 in June, expanding by the slowest pace in two years. In China, the Purchasing Managers’ Index was at 50.7 compared with 50.9 in June, while a manufacturing gauge in the euro region dropped to 50.4 from 52, reports yesterday showed.
Slowing Growth
“There are concerns that the U.S. government spending cuts could be a drag on the economy at a time where growth is already slowing,” Tobias Merath, head of global commodity research at Credit Suisse AG, wrote in a note today.
While the immediate economic impact from the spending cut is likely to be small, it will add to a reduction in growth next year of 1.5 percentage points from the expiration of past stimulus programs, according to economists at JPMorgan Chase & Co. and Deutsche Bank Securities.
Job-creation efforts have already been hampered by slowing growth. Employers in the U.S. added 18,000 jobs in June, the fewest in nine months, compared with a forecast of an increase of 105,000 in a Bloomberg News survey. The Labor Department may say on Aug. 5 that nonfarm payrolls climbed 85,000 in July, a separate survey showed.
‘Well-Supported’
Gold prices are “well-supported at current levels” as central banks move excessive foreign-exchange holdings into bullion and inflation in China and India boosts the lure of the metal, said Gary Halverson, regional Australia-Pacific president at Barrick Gold Corp., the world’s largest producer.
Central banks, the world’s biggest holders of bullion, about doubled purchases in the first five months of this year, according to the World Gold Council. The Bank of Korea bought 25 tons over a one-month period from June to July, lifting its reserve to 39.4 tons, the central bank said, declining to comment on the price and plans for additional purchases.
Cash platinum was unchanged at $1,792.50 an ounce, while palladium rose 0.5 percent to $833 an ounce.
To contact the reporter on this story: Glenys Sim in Singapore at gsim4@bloomberg.net
To contact the editor responsible for this story: Richard Dobson at rdobson4@bloomberg.net
