BLBG: Gold May Extend Four-Week High on Signs of a Slowing Economy
Aug. 13 (Bloomberg) -- Gold, trading at a four-week high in London, may extend gains as concern that the economic recovery is slowing increases demand for the precious metal as a protection of wealth.
The metal jumped 1.3 percent yesterday, the most since June 17, and is headed for a second weekly gain. Gold has gained this week as the Federal Reserve said economic growth is slowing and it will revive its Treasury purchases, and on negative production data globally. Bullion-backed exchange-traded fund holdings rose for a second day yesterday, while the dollar today fell for the first time this week against the euro.
“Support will come from potential safe-haven inflows, disappointing economic data, and new signs of investment return to gold,” Tom Pawlicki, an analyst at MF Global Holdings Ltd. in Chicago, said in a report. “Gold prices have benefited from its inability to be monetized, defaulted on, or devalued.”
Immediate-delivery bullion added as much as $3.72, or 0.3 percent, to $1,217.57 an ounce, the highest price since July 14. Gold was at $1,216.25 at 8:49 a.m. in London and is up 0.9 percent this week. The metal for December delivery was 0.1 percent higher at $1,218.10 on the Comex in New York.
The dollar also gained this week as some investors sought the perceived safety of the currency. The greenback dropped as much as 0.6 percent against the euro today after data showed the German economy grew at the fastest pace in two decades. Bullion, which climbed to a record $1,265.30 an ounce on June 21, usually moves inversely to the dollar.
‘Wobbly Outlook’
The pace of economic recovery in the U.S. probably will be “more modest” than expected, the Federal Reserve said Aug. 10 as it kept interest rates at a record low. A day later, the Bank of England cut its forecast for U.K. economic growth. European industrial production unexpectedly slid in June, China’s factory output expanded at the slowest pace in 11 months, and U.S. jobless claims rose, data showed this week.
Goldman Sachs Group Inc. said there’s a 25 percent to 30 percent chance the U.S. economy will fall back into a recession.
“The wobbly outlook for the economy is bolstering investor demand for gold,” said Hwang Il Doo, a Seoul-based senior trader with KEB Futures Co. “Good momentum is likely to continue into next week.”
Ten of 18 traders, investors and analysts surveyed by Bloomberg, or 56 percent, said gold will gain next week. Two forecast lower prices and six were neutral.
Assets in the SPDR Gold Trust, the biggest exchange-traded fund backed by bullion, rose for a second day, adding 0.91 metric ton to 1,286.7 tons yesterday, according to the company’s website.
Silver for immediate delivery in London rose 0.5 percent to $18.1475 an ounce. Platinum gained 0.4 percent to $1,536.50 an ounce. Palladium increased 1.2 percent to $475.17 an ounce.
