BLBG:Gold Advances on Stimulus Speculation Before Bernanke
Gold gained in London as speculation that the U.S. Federal Reserve may signal the need for sustained stimulus countered further outflows from investor holdings.
The Federal Open Market Committee will publish minutes of its latest meeting today and Fed Chairman Ben S. Bernanke testifies in Congress. St. Louis Fed President James Bullard said yesterday that the U.S. central bank should keep buying bonds and New York Fed President William Dudley said it had previously been overly optimistic about growth. Gold fell into a bear market last month on expectations the Fed may scale back quantitative easing and as investment holdings fell.
“Markets are likely to focus on the FOMC meeting minutes,” William Adams, an analyst at FastMarkets Ltd. in London, wrote today in a report. “We would expect little change in the stance and would be surprised if the window to start fading QE had been brought any nearer. If the status quo is kept then that might provide the markets with some fuel.”
Gold for immediate delivery rose 0.7 percent to $1,385.99 an ounce by 11:25 a.m. in London. Bullion for June delivery was up 0.5 percent at $1,384.20 on the Comex in New York. Futures trading volume was 23 percent above the average in the past 100 days for this time of day, according to data compiled by Bloomberg.
Bullion at the morning “fixing,” used by some mining companies to sell output, was at $1,385.25 in London, up from $1,360.75 yesterday afternoon.
Gold ETPs
Bullion slid 17 percent this year after 12 straight annual gains. Holdings in exchange-traded products dropped 10.3 metric tons to 2,177.1 tons yesterday, the lowest since July 2011, and are down 17 percent this year, according to data compiled by Bloomberg. The 454.8 tons sold since the start of January surpassed combined additions in the previous two years.
In the testimony today, Bernanke may offer clues whether the labor market is strong enough to allow reducing stimulus. At present, the Fed buys $85 billion of securities a month to bolster the recovery and cut joblessness. Policy makers will know in three to four months whether the economy is healthy enough to overcome federal budget cuts and allow the central bank to begin reducing record stimulus, the New York Fed’s Dudley said in a Bloomberg Television interview airing today.
The Bank of Japan today affirmed a plan to double the monetary base over two years after a jump in bond yields highlighted risks associated with Prime Minister Shinzo Abe’s campaign to revive the economy.
“If Bernanke conveys a cautious tone about the economy,” his remarks may be positive for prices, HSBC Securities (USA) Inc. analyst Howard Wen wrote in a note. “Gold historically has been highly sensitive to changes in monetary policies.”
Silver for immediate delivery rose 0.8 percent to $22.6175 an ounce in London. Palladium added 0.4 percent to $749.95 an ounce. Platinum increased 0.1 percent to $1,464.90 an ounce.
To contact the reporters on 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
