BLBG:Gold Rebounds on U.S. Budget Optimism, Record Investor Holdings
Gold rebounded from the biggest drop in more than three weeks as investor holdings expanded to a record and optimism returned that the so-called fiscal cliff in the U.S. will be avoided, hurting the dollar.
Holdings in exchange-traded products expanded to 2,615.89 metric tons yesterday, according to data tracked by Bloomberg. Republican House Speaker John Boehner said he is optimistic officials can “avert this crisis sooner rather than later.” Treasury Secretary Timothy F. Geithner meets today with congressional leaders to discuss how to head off the $607 billion combination of tax increases and spending cuts that may be implemented in January.
“The whole environment around the fiscal cliff is very uncertain,” said Bjarne Schieldrop, the Oslo-based head of commodity research at SEB AB. “The fiscal cliff will be on and off every other day. Most likely it won’t be resolved before the first quarter, but I think that the general direction for gold will be up. Record ETP holdings and central bank buying are giving good support to the sentiment.”
Gold for immediate delivery rose 0.3 percent to $1,724.22 an ounce by 11:53 a.m. in London. Bullion for February delivery gained 0.4 percent to $1,725.90 an ounce on the Comex in New York.
The price dropped 1.3 percent yesterday in London, the biggest fall since Nov. 2, on concern that a U.S. deal won’t be agreed. The U.S. Dollar Index (DXY), a measure against a six-currency basket, declined 0.3 percent today, boosting demand for bullion as an alternative investment.
Gold at the morning “fixing,” used by some mining companies to sell output, advanced to $1,724.50 an ounce in London from $1,708 yesterday afternoon.
Follow-Through
“We’re not seeing signs of any significant follow-through selling,” said Nick Trevethan, a senior commodities strategist at Australia & New Zealand Banking Group Ltd. (ANZ) in Singapore. “The factors supporting gold really haven’t gone away. You still have large amounts of liquidity in the system, you’re seeing central banks trying to support markets.”
Gold, little changed this month, has climbed 10 percent this year after central banks from the U.S. to Europe took more steps to boost growth, raising concern currencies may weaken. Gold rallied 70 percent as the Federal Reserve bought $2.3 trillion of debt in two rounds of quantitative easing from December 2008 through June 2011.
Palladium for immediate delivery rose 1 percent to $681.50 an ounce, and reached $682, the highest level since Sept. 18, while platinum climbed 0.9 percent to $1,619.75 an ounce. Silver was little changed at $33.7656 an ounce.
To contact the reporters on this story: Maria Kolesnikova in London at mkolesnikova@bloomberg.net; Phoebe Sedgman in Melbourne at psedgman2@bloomberg.net
To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net
