Gold traded above a 2 1/2-year low on speculation demand may be spurred by the price slump that followed the Federal Reserve’s indications on cutting stimulus. The metal fell 6.8 percent last week after Fed Chairman Ben S. Bernanke said the U.S. central bank, which buys $85 billion of Treasury and mortgage debt a month, may slow its asset purchase program if the U.S. economy continues to improve. Gold fell to a technical level that signals to some analysts that prices may rebound. Russia and Kazakhstan were among nations that expanded bullion reserves in May, International Monetary Fund data show. Bullion slid 23 percent this year as some investors lose faith in it as a store of value and as speculation grew that the Fed will taper debt-buying that helped the metal cap a 12-year bull run last year. Morgan Stanley lowered its forecasts for prices and said waning investor interest has turned more serious on the prospect of less stimulus that’s pushed up bond yields and strengthened the dollar. “Although we expect a positive physical demand response to eventually cushion gold’s drop, we do not believe it will be of the scale or magnitude of the reaction in April,� James Steel, an analyst at HSBC Securities (USA) Inc., wrote in a note. “Price-sensitive buyers may wait for a well-defined bottom before entering the market. Turmoil in emerging markets and the prospects of lower growth in China have weighed on bullion.� Gold for immediate delivery rose 0.3 percent to $1,285.67 an ounce by 10:16 a.m. in London. Prices reached $1,269.46 on June 21, the lowest since September 2010. Bullion for August delivery gained 0.6 percent to $1,284.50 on the Comex in New York. Futures trading volume was 10 percent above the average in the past 100 days for this time of day, according to data compiled by Bloomberg. Bear Market Gold entered a bear market in April, extending the retreat from its all-time high of $1,921.15 in September 2011. The metal’s 14-day relative strength index was at 29.8, below the level of 30 that indicates to some analysts who study technical charts that a rebound may be near. Global holdings in exchange-traded products fell 4 metric tons to 2,094.6 tons yesterday, the lowest since June 2010, data compiled by Bloomberg show. Morgan Stanley cut its 2013 gold forecast to $1,409 from $1,487, and lowered its 2014 target to $1,313 from $1,563, according to a report today. “The market is weary after last week’s move and this is reflected in the lack of interest,� David Govett, head of precious metals at Marex Spectron Group in London, said today in a report. “Physical buying is not abundant and quite frankly at this moment in time, there are no real reasons to be long of precious metals.� Central Banks Azerbaijan and the Kyrgyz Republic were among nations that bought bullion in May, while Mexico and the Czech Republic reduced holdings, data on the IMF’s website show. Silver for immediate delivery rose 0.6 percent to $19.7995 an ounce in London. It reached $19.3993 on June 21, the lowest since September 2010. Palladium was up 1.6 percent at $672.53 an ounce. It reached $649.90 yesterday, the lowest since April 16. Platinum, which entered a bear market last week, added 1.4 percent to $1,352.99 an ounce in London. The metal, mainly used in jewelry and pollution-control devices in cars alongside palladium, reached $1,326.08 earlier today, the lowest since November 2009. To contact the reporter 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

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