Gold futures gained for a third day after the Federal Reserve, seeking to bolster the economy, pledged to keep interest rates low through mid-2013, boosting demand for the metal as a haven investment.
Gold for December delivery climbed as much as 1.6 percent to $1,770 an ounce on the Comex in New York and was at $1,758.10 as of 10:12 a.m. Singapore time. The metal for immediate delivery gained 0.9 percent to $1,755.90 an ounce.
Futures added as much as 4.1 percent yesterday to a record $1,782.50 an ounce. They have surged 24 percent this year, heading for an 11th year of gains, as the sovereign-debt crisis and a faltering economy boost demand for protection of wealth. Prices were also supported following bond buybacks by the U.S. central bank during two rounds of so-called qualitative easing, combined with the lowest borrowing costs ever.
“Rising interest rates tend to detract from gold as investors looking for yields will look elsewhere,” Darren Heathcote, head of trading at Investec Bank (Australia) Ltd., said by phone from Sydney. “As long as rates stay low, particularly U.S. dollar, it will help to support gold, if not push it higher in due course.”
Quantitative Easing
The dollar was 0.5 percent from a one-week low against the euro on speculation Federal Reserve policy makers will signal which additional tools the central bank is prepared to use to bolster the U.S. economy.
In pledging to keep its benchmark rate at an all-time low, the Fed also discussed a range of policy tools to bolster the economy, saying it is prepared to use them “as appropriate.” The statement fueled speculation the central bank may consider a third round of quantitative easing through bond purchases to revive a recovery that’s “considerably slower” than anticipated.
“Ultimately gold is bought for that fact that it’s a safe haven,” Heathcote said. “If quantitative easing is seen as being supportive of the markets and helping, particularly the U.S. economy, to recover, you could argue that it shouldn’t be supportive of gold.”
Gold reached record after Standard & Poor’s cut the U.S. credit rating by one level from the top AAA grade on Aug. 5. The S&P announcement spurred a rout in global equities and stoked concern that the U.S. may lapse into another recession.
Holdings in exchange-traded products backed by gold dropped 0.5 percent yesterday to 2,206.78 metric tons, ending 11 straight days of gains, according to data compiled by Bloomberg. Holdings rose to a record 2,216.8 tons on Aug. 8, data show.
Silver for immediate delivery jumped 2.2 percent to $38.43 an ounce. The September-delivery contract gained 1.3 percent to $38.37 an ounce. The gold-silver ratio reached 45.57 today, meaning an ounce of gold buys 45.57 ounces of silver, according to Bloomberg data. That compares with a low of 31.71 on April 28.
Spot Palladium advanced 0.7 percent to $746 an ounce and platinum gained 0.3 percent to $1,759.50 an ounce.
To contact the reporter for this story: Phoebe Sedgman in Melbourne at psedgman2@bloomberg.net
To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net
