Gold may rally from its biggest drop since February 2010 as investors continue to seek a haven amid sovereign-debt crises and slowing economic growth. CME Group Inc. (CME) raised futures margins for a second time this month. Bullion for immediate delivery increased as much as 0.4 percent to $1,766.85 an ounce and traded at $1,758.40 at 10:47 a.m. in Singapore. The metal slumped 3.8 percent yesterday as better-than-estimated U.S. economic data boosted the dollar and equities, trimming demand for safe assets before central bankers from around the world gather tomorrow in Jackson Hole, Wyoming. Gold is in the 11th year of a bull market and has gained 24 percent this year as investors seek to diversify their holdings away from equities and some currencies. The metal is up 7.9 percent in August, heading for its second monthly increase, and reached a record $1,913.50 on Aug. 23. “Near-term there’s still a lot of reason for gold to outperform other commodities because we don’t think that problems are being resolved,” Justin Smirk, senior economist at Westpac Institutional Bank, a unit of Australia’s Westpac Banking Corp. Gold has dropped 8.1 percent from its all-time high in “a correction that we had to have,” he said. Exchange-traded-product holdings fell for a fourth day yesterday, shrinking 26.9 metric tons to 2,154.714 tons, the largest outflow since January, data compiled by Bloomberg show. Assets reached a record 2,216.8 tons on Aug. 8. “You are getting some speculation about what’s going to happen over the weekend with Jackson Hole but probably there’s a little bit too much excitement there,” Smirk said from Sydney. “The Europeans haven’t resolved their issues and they’re going to come back and bite us again very soon.” Gold Margins CME, the largest futures market, raised margins by 27 percent with effect from the close of business today, it said in a statement. The initial-margin requirement, or the minimum amount of cash that speculators must keep on deposit, will rise to $9,450 per 100-ounce contract from $7,425. The maintenance margin also rises 27 percent to $7,000 from $5,500, it said. The December-delivery contract was little changed at $1,755.90 an ounce on the Comex. Futures, which touched their highest ever $1,917.90 on Aug. 23, tumbled 5.6 percent yesterday, the most since March 2008. The CME joins the Shanghai Gold Exchange in hiking margins. China’s largest physical gold market will increase the trade margin requirement for its gold forward contracts for the second time in a month from settlement today, it said on Aug. 23. “It’s not just the price move that day,” Harriet Hunnable, CME’s head of metals products, said in an interview Aug. 22, referring to why the bourse alters margins. “It’s definitely not the price up or price down. When volatilities go up, we make a decision to put the market on notice that we will raise margins.” Bernanke Speaks Federal Reserve Chairman Ben S. Bernanke will deliver a speech tomorrow at an annual meeting that last year saw him hint at a second round of asset purchases to stimulate the U.S. economy. Orders for U.S. durable goods beat economists’ forecasts while home prices increased the most since September 2005, data yesterday showed, trimming expectations of further so-called quantitative easing, driving stocks and the U.S. dollar higher. The downgrade in expectations has “provided a decent backdrop for U.S. dollars,” Steward Hall, senior currency strategist at RBC Dominion Securities Inc., said. “Growth proxies were sold” and “gold, the traditional first line of defence against the monetary printing press, fell hard.” Cash silver gained 0.3 percent to $39.8538 an ounce, spot platinum climbed 0.1 percent to $1,813.75 an ounce and palladium rose 0.3 percent to $750.50 an ounce. -- Editor: James Poole To contact the reporter on this story: Glenys Sim in Singapore at gsim4@bloomberg.net To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net

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