BLBG: Gold Set for Best Month Since January as Rout Lifts Haven Assets
Bullion bucks slide in broader Bloomberg Commodity Index
Investors weigh outlook for U.S. rate rise after markets slump
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Gold is set to halt two months of losses as concern that China may be slowing triggered a rout in global financial markets and drew investors to haven assets, countering prospects for an interest-rate increase in the U.S.
Bullion for immediate delivery traded at $1,134.12 an ounce at 12:50 p.m. in Singapore from $1,133.60 Friday, when the metal completed a weekly drop of 2.3 percent, according to Bloomberg generic pricing. Prices have risen 3.5 percent in August, on track for the best monthly advance since January, as a surprise devaluation of China’s currency fueled concern that the world’s second-largest economy may be in worse shape than previously thought.
Holdings in bullion-backed exchange-traded funds rose to a one-month high on Aug. 27 as the MSCI All-Country World Index of equities headed for the worst monthly performance since May 2012 and a gauge of 22 raw materials was set to decline for a second month. Only lean hogs performed better than gold on the Bloomberg Commodity Index in August. Turmoil in financial markets has clouded the outlook for U.S. monetary policy, with traders betting there’s a 38 percent chance the Federal Reserve will raise rates at its September meeting, down from 48 percent two weeks earlier.
“I believe that there’s little near-term prospect for a U.S. rate rise,” Gavin Wendt, a Sydney-based senior resource analyst at Mine Life Pty., said in an e-mail. “The Fed keeps talking tough on rates, but in reality I don’t believe the U.S. economy’s recovery is strong enough for the Fed to take the risk.”
Gold is still 4.2 percent lower this year as expectations of tighter U.S. monetary conditions curb the appeal of the metal which doesn’t pay interest or offer returns, unlike competing assets. Fed Vice Chairman Stanley Fischer indicated policy makers are open to increasing borrowing costs next month, saying Aug. 29 that there is “good reason” to believe inflation will accelerate.
Gold futures for December delivery were unchanged at $1,134 an ounce on the Comex, up 3.6 percent this month. Speculators more than tripled their net-bullish position to 44,271 futures and option contracts in the week ended Aug. 25, according to Commodity Futures Trading Commission data released three days later.
In China, the world’s largest bullion consumer, metal of 99.99 percent purity climbed 0.2 percent to 233.64 yuan a gram ($1,139.25 an ounce) on the Shanghai Gold Exchange.
Silver for immediate delivery fell 0.4 percent to $14.545 an ounce, poised for a 1.6 percent drop in a third month of declines. Platinum fell 1.1 percent to $1,006.50 an ounce, trimming the first monthly increase since April. Palladium decreased 0.9 percent to $582.50 an ounce, set for a fourth monthly retreat.
