BLBG:Gold Rebounds With Silver After Slumping to Cheapest Since 2010
Gold and silver rallied from their lowest levels since September 2010 on speculation the slump may spur purchases. Gold is still set for its worst week since September 2011 after the Federal Reserve signaled it’s getting closer to reducing monetary stimulus as the economy recovers.
Cash bullion rose as much as 1.1 percent to $1,299.07 an ounce and was at $1,297.13 at 2:26 p.m. in Singapore, snapping four days of losses. Gold’s 14-day relative strength index was at 29.4, below the level of 30 that indicates to some analysts who study technical charts that a rebound may be imminent.
A buying frenzy from China to India and the U.S. followed the biggest price drop in 30 years in April, driving prices up more than $150 an ounce. It’s too soon to predict if this will be repeated as the investors who were enthusiastic buyers in April have become more cautious, according to CPM Group.
“The worst of the current round of decline is probably behind us as gold prices may stabilize and rebound,” Jeffrey Christian, managing partner at CPM, said in an interview in Zhaoyuan, China today. “It’s going to be very important to see in the next few days how enthusiastic investors are. If they signal they are waiting for still lower prices, that will be a very negative signal.”
Gold earlier dropped to $1,269.46, the cheapest since Sept. 16, 2010, and is down 6.7 percent this week in the worst showing since Sept. 23, 2011.
Silver Rebounds
Cash silver gained 0.9 percent to $19.8935 an ounce, after falling to $19.399, the cheapest since 2010. It’s 10 percent lower this week. One ounce of gold bought as much as 65.4626 ounces of silver, the most since August 2010, as investors lost faith in a store of value with ties to economic growth.
Bullion has tumbled 23 percent this year, heading for the biggest annual drop since 1981, as some investors lose faith in gold as a protection of wealth amid speculation that the Fed will taper debt-buying that helped the metal cap a 12-year bull run last year. Fed Chairman Ben S. Bernanke said this week that the central bank, which buys $85 billion a month of Treasury and mortgage debt, may begin reducing purchases this year and end the program in 2014 should the economy continue to improve.
Gold entered a bear market in April and has retreated more than 30 percent from its all-time high of $1,921.15 in September 2011 amid low inflation and a global equity rally. Investors sold 355.5 tons this year from the SPDR Gold Trust, the largest bullion-backed exchange traded product, erasing $32 billion from the fund’s value. The MSCI All-Country World Index of equities gained 3.9 percent in 2013 and the Dollar Index, a measure against six major currencies, has climbed 2.5 percent.
Margins Raised
Gold futures for August delivery climbed 0.8 percent to $1,295.90 an ounce on the Comex in New York, reversing a 1.4 percent drop, and paring this week’s decline to 6.6 percent. CME Group Inc. increased the margin requirements on gold trading, raising the minimum cash deposit for futures by 25 percent to $8,800 per 100-ounce contract at the close of trading today.
The slump in gold prices triggered a drop in related equities. Newcrest Mining Ltd., Australia’s biggest producer, slid 4.8 percent to A$10.17 in Sydney, taking this year’s loss to 54 percent. Zijin Mining Group Co., China’s biggest gold miner by market value, lost 3 percent to HK$1.63 in Hong Kong.
Spot platinum gained 0.5 percent to $1,370.60 an ounce, down 5.1 percent this week. The metal earlier tumbled 2.2 percent to $1,334.30, the lowest since November 2009.
Palladium rose 2 percent to $675.75 an ounce, halting six days of losses. It’s set to drop 7.6 percent this week after earlier decreasing 1.1 percent to a two-month low of $655.25.
To contact the reporter on this story: Glenys Sim in Singapore at gsim4@bloomberg.net
To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net
