Gold gained in London as the metal’s drop below $1,600 an ounce boosted physical purchases and as investors sought a protection of wealth from Europe’s debt woes. The European debt crisis continues to be a drag on the U.S. economy, President Barack Obama said yesterday, while German lawmakers today may approve the expansion of a bailout fund for debt-stricken euro-area nations. Gold, which has fallen 15 percent from its record earlier this month, this week slipped below $1,600 for the first time since July. “Physical demand has been very extraordinary,” Bernard Sin, head of currency and metal trading at bullion refiner MKS Finance SA in Geneva, said by phone today. “We’ll continue to see that demand coming in. There’s a lack of confidence in Europe and the U.S.” Immediate-delivery gold rose $20.20, or 1.3 percent, to $1,629 an ounce by 9:19 a.m. in London. The metal earlier today fell as low as $1,583.82. Gold for December delivery was 0.8 percent higher at $1,630.30 on the Comex in New York. Gold is in the 11th year of a bull market, the longest winning streak since at least 1920 in London. Prices reached a record $1,921.15 on Sept. 6 as investors sought to diversify away from equities and some currencies. The metal is up 15 percent this year and 8.6 percent this quarter, as commodities head for their biggest quarterly slump since 2008. German Chancellor Angela Merkel is attempting to win the backing of her coalition to expand the powers of the European Financial Stability Facility. The vote in Berlin on changes to the EFSF would allow the fund to buy the bonds of distressed member states and offer emergency loans to governments. Banking Turmoil The euro-area economy will fall into recession during the next 12 months, according to about three-quarters of those questioned this week in a global poll of 1,031 investors, analysts and traders who are Bloomberg subscribers. Forty percent see the 17-nation currency bloc losing at least one member in the next year and 53 percent said turmoil will worsen in a banking sector laden with government bonds. “The turmoil in Europe only seems to be getting worse,” Jonathan Barratt, managing director at Commodity Broking Services Pty., wrote in a report. “Growth in demand is coming from India and China.” The slump in prices from a record will fuel demand during the festival season in India, the biggest buyer, according to Titan Industries Ltd. (TTAN), the nation’s biggest jewelry retailer. Premiums paid over the London spot price for gold bars in India were quoted at the highest level in more than a year, according to Phillip Futures analyst Ong Yi Ling. Premiums in Hong Kong have almost doubled to $2 to $3 per ounce, said Dick Poon, precious-metals trading manager at Heraeus Ltd. Gold Assets Gold exchange-traded-product holdings fell 2.7 metric tons to 2,218.4 tons yesterday, the lowest level in two months. Assets reached a record 2,298.4 tons on Aug. 8, Bloomberg data show. Silver for immediate delivery climbed 4.4 percent to $31.1675 an ounce. The metal is little changed this year after touching a record $49.79 on April 25. Platinum rose 1.1 percent to $1,542.40 an ounce, after earlier this week dropping to $1,471.25, the lowest since May 2010. Gold’s premium over platinum was at 5.5 percent, near the most since January 1992, data compiled by Bloomberg show. Palladium was up 1.2 percent at $628 an ounce. It fell to $605.25 earlier this week, the lowest level since October. To contact the reporters for 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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