BLBG:Gold Rises as Two-Day Decline From Record Price Spurs Investment Demand
Gold gained in London after a two- day slump attracted physical purchases and spurred investors to buy the metal as a protection of wealth.
Bullion slid 4.4 percent in the previous two days, dropping from a record $1,921.15 an ounce on Sept. 6. It tumbled the most in two weeks yesterday as global equities rallied amid optimism a plan by U.S. President Barack Obama will aid growth in the world’s largest economy. European Central Bank President Jean- Claude Trichet will probably resist calls to cut the benchmark interest rate today and may opt instead to increase the supply of cash to euro-area banks as the region’s debt crisis worsens.
“We’re heading into a good period for seasonal demand and people are taking the opportunity to pick up gold on these dips,” Dan Smith, an analyst at Standard Chartered Plc in London, said today by phone. “The main trend is that things will remain poor from a macro perspective and that will support gold.”
Immediate-delivery gold gained $19.18, or 1.1 percent, to $1,836.65 an ounce by 9:16 a.m. in London. Gold for December delivery was up 1.2 percent at $1,839.10 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. The metal is up 29 percent this year, outperforming global stocks, commodities and Treasuries.
Obama Jobs Plan
Equities rallied around the world yesterday as investors speculated that Obama will introduce a $300 billion plan to create more jobs in a speech to Congress today. Obama will propose a stimulus plan in the Republican-controlled House chamber as job growth stalls and the unemployment rate hovers above 9 percent.
European policy makers will keep interest rates at 1.5 percent, according to economist estimates in a Bloomberg News survey. They will announce their decision at 1:45 p.m. in Frankfurt. The ECB may lower its inflation and growth forecasts, signaling rates are now on hold after two increases this year.
The metal will average $2,075 next year, up from a previous estimate of $1,380, UBS AG wrote in a report yesterday. It raised its 2011 outlook to $1,665 from $1,500.
“The only thing that can kill the gold price at these levels on a sustained basis is something serious to the fundamentals like the European banks selling gold, some sort of concerted deleveraging in European markets so they start sorting out their debt issues, or if you have some lift in gold scrap supply,” Tom Price, an analyst at UBS, said by phone from Sydney. “We haven’t seen anything like that.”
Gold exchange-traded-product holdings fell 0.9 metric ton to 2,141.2 tons yesterday, data compiled by Bloomberg show. Assets reached a record 2,216.8 tons on Aug. 8.
Silver for immediate delivery rose 0.4 percent to $41.7475 an ounce. Platinum was up 0.6 percent at $1,833.25 an ounce. Palladium gained 0.8 percent to $758 an ounce.
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.
