Gold traders are bullish for a fourth consecutive week, betting that the Federal Reserve’s pledge to keep interest rates low until late 2014 will extend the metal’s best start to a year in more than three decades.
Nine of 15 surveyed by Bloomberg expect prices to gain next week. The value of gold held in exchange-traded products jumped $3.9 billion on Jan. 25, the most since October, as the central bank laid the groundwork for a possible third round of asset purchases, data compiled by Bloomberg show. Lower interest rates increase the appeal of bullion because it generally earns investors returns only through price gains.
Bullion rose 2.7 percent, the most in three months, after Chairman Ben S. Bernanke said he’s considering additional bond purchases to boost growth. The Fed bought $2.3 trillion of debt in two rounds of quantitative easing from December 2008 to June 2011, during which gold appreciated about 70 percent. Investors are now buying American Eagle gold coins from the U.S. Mint at the fastest pace since July 2010, data on its website show.
January Rally
Gold rose 9.9 percent to $1,720.65 an ounce this month by yesterday, the best start to a year since 1980 and rebounding from the first quarterly decline in three years. Bullion is beating the 3.1 percent advance in the Standard & Poor’s GSCI Total Return Index of 24 commodities and the 6 percent gain in the MSCI All-Country World Index of equities. Treasuries lost 0.2 percent, a Bank of America Corp. index shows.
The metal reached a record $1,921.15 in September and slid to within 1 percentage point of a bear market on Dec. 29, taking it below its 200-day moving average for the first time since January 2009. Gold closed back above the 200-day moving average on Jan. 11 and the 100-day moving average on Jan. 25. That’s a sign for some investors who study charts of trading patterns and prices to predict trends that the rally has further to go.
The Fed pledged that it is “prepared to provide further monetary accommodation” if unemployment remains higher than it would like while inflation falls below a newly-established target. The International Monetary Fund said a day earlier that the world economy will expand 3.3 percent this year, down from a 4 percent estimate in September. The World Bank cut its growth forecast last week by the most in three years.
