BLBG:Gold Rebounds From Lowest Level in Six Months Heading for 11th Annual Gain
Gold, poised for an 11th year of advance, rebounded from the lowest level in six months as a slump that threatened to tip the metal into a bear market spurred purchases, tempering the effect of a stronger dollar.
Immediate-delivery gold climbed as much as 0.9 percent to $1,560 an ounce and was at $1,555.30 by 1:01 p.m. in Singapore, up 9.5 percent in 2011. Holdings in exchange-traded (.GLDTONS) products, which reached a record 2,360.81 metric tons on Dec. 14, increased for a second day yesterday to 2,326.998 tons, according to data compiled by Bloomberg.
“Despite gold’s recent correction, the uptrend remains firmly in place,” said Gavin Wendt, founder and senior resource analyst at Mine Life Pty. “The important thing about the recent price correction is that gold has been sold because it is a profitable asset. It’s been used to fund losses on declining assets elsewhere in investors’ portfolios, like equities.”
February-delivery bullion rose as much as 1.3 percent to $1,561 an ounce, snapping a six-day losing streak which was the longest since March 2009. It last traded at $1,556.30 on the Comex in New York. Futures are 9.5 percent higher this year.
Spot gold is on track of the longest bull run since at least 1920 as investors seek to hedge against weakening currencies, declining equities and rising inflation. Bullion reached a record $1,921.15 on Sept. 6, and would need to close below $1,536.92 to enter a bear market, typically defined as a drop of more than 20 percent from a recent high.
In October 2008, gold tumbled 17 percent as the worst recession since the Great Depression sent global equity and commodity markets tumbling. The metal jumped 22 percent in the next two months. Still, bullion is 4.2 percent lower this quarter for its first quarterly drop since the three months to September 2008, after the fall of Lehman Brothers Holdings Inc.
Dollar Strength
Cash gold dropped to $1,522.65 yesterday, the lowest level since July 6, as the dollar rallied on concerns that Europe’s debt crisis may escalate and hurt global growth. The U.S. currency has advanced 0.8 percent against the euro this week as bullion lost 3.2 percent.
“Gold has pulled back with the commodities in general as people sold risk assets, but the main drivers for gold are still out there,” said Dan Denbow, a co-fund manager of the $2.1 billion USAA Precious Metals and Minerals Fund in San Antonio. “The budget deficits still exist and what the governments will do to resolve that will most likely end up being inflationary, and that’s going to be supportive for gold. Gold is probably one of the few commodities you will see people coming back to in early 2012.”
Spot silver slid 0.8 percent to $27.2775 an ounce, extending this year’s 11 percent drop and set for its first annual decline in three years.
Cash palladium climbed as much as 1.9 percent to $638 an ounce, before trading at $632.50, paring the annual loss to 21 percent, which is the first yearly fall since 2008.
Platinum, the worst-performing precious metal in 2011, rose for the first time in three days, rebounding from a two-year low of $1,344.25 an ounce. It advanced as much as 1.5 percent to $1,390 an ounce and last traded at $1,383.50, taking the year’s loss to 22 percent for its first annual decline in three years.
To contact the reporter on this story: Glenys Sim in Singapore at gsim4@bloomberg.net
To contact the editor responsible for this story: Richard Dobson at rdobson4@bloomberg.net
