Gold gained in London as falling equities and the metal’s biggest weekly drop in more than three months spurred investor demand before a speech by Federal Reserve Chairman Ben S. Bernanke.
Gold slumped as much as 11 percent in the three days through yesterday after touching a record $1,913.50 an ounce on Aug. 23. European equities fell and the dollar weakened versus most major currencies as traders waited to see whether Bernanke will signal further steps to support the economy when he speaks at 10 a.m. New York time. He’s said the central bank will keep borrowing costs near zero at least through mid-2013.
“It’s going to be about what Bernanke says or doesn’t say,” Peter Fertig, the owner of Quantitative Commodity Research Ltd. in Hainburg, Germany, said by phone today. Falling equities “are providing support for gold as a safe haven. There is of course some bargain hunting” after this week’s drop, he said.
Immediate-delivery gold rose $14.70, or 0.8 percent, to $1,788.85 an ounce by 10:03 a.m. in London. Prices are down 3.5 percent this week, the most since May. The metal for December delivery was up 1.5 percent at $1,789.90 on the Comex in New York.
Bullion is in the 11th year of a bull market, the longest winning streak since at least 1920 in London, as investors seek to diversify away from equities and some currencies. Before this week, gold had climbed for seven consecutive weeks, the longest run of gains since April 2007.
Heightened Volatility
Gold futures tumbled 5.6 percent on Aug. 24, the most since March 2008, as reports on durable-goods orders and home prices beat analyst estimates and equities climbed, prompting CME Group Inc. to raise margins on futures contracts for a second time this month. The 10-day historical volatility for gold futures this week jumped to about 41 percent, the highest level since March 2009, data compiled by Bloomberg show.
Fed Chairman Bernanke will speak in Jackson Hole, Wyoming, and investors will look for indications of whether the central bank will embark on further stimulus. Bernanke used his Jackson Hole speech last year to announce the Fed would “do all that it can” to spur growth. He implemented a $600 billion debt- purchase plan in November.
“Bernanke probably will hint that he is ready to use further stimulus if the economy deteriorates,” Pu Yonghao, chief investment strategist at UBS Wealth Management, told Bloomberg Television. “People are concerned the probability of recession has increased. Gold is a kind of insurance, to insure against the potential quantitative easing.”
India Buys
UBS AG’s physical gold sales to India yesterday were more than twice the daily average and are set for the best week since May, Edel Tully, a London-based analyst at UBS wrote in a report. “We expect a stronger buying response today,” she said.
Exchange-traded-product holdings were little changed yesterday after falling the previous four days. Assets declined 0.3 metric ton to 2,154.4 tons, data compiled by Bloomberg show. Holdings reached a record 2,216.8 tons on Aug. 8.
Silver for immediate delivery fell 0.8 percent to $40.7675 an ounce. It dropped 5 percent this week, the most since May, and is up 32 percent this year.
Platinum was up 0.2 percent at $1,823.25 an ounce, cutting its weekly loss to 2.8 percent. Palladium slipped 0.5 percent to $748 an ounce. Prices are down 0.5 percent this week.
To contact the reporters on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net; Glenys Sim in Singapore at gsim4@bloomberg.net
To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net.
