Gold traded near the highest level in three weeks as investors weighed stimulus measures designed to spur economic growth with expectations for higher borrowing costs in the U.S. Platinum advanced.
China cut benchmark interest rates last week after the Bank of Japan boosted its unprecedented stimulus last month. European Central Bank President Mario Draghi last week signaled policy makers are ready to implement additional stimulus measures if needed. Holdings in gold-backed exchange-traded products rose for a second day.
Some investors buy gold to protect themselves from monetary easing that may devalue currencies and accelerate inflation. Gold climbed 70 percent from December 2008 to June 2011 as theFederal Reserve bought debt and held U.S. borrowing costs near zero in a bid to shore up economic growth. Gold still is set for the first back-to-back annual drop since 2000 as the Federal Reserve moves toward raising interest rates.
“Differences in economic fundamentals in the U.S., Europe, Japan and China have led to policy divergence, a situation we see continuing in the medium term,” Yang Xi, a Hangzhou, China-based analyst at Yongan Futures Co., wrote in a note. “While ongoing stimulus will give precious metals some support, the strength of the dollar will limit any rallies.”
Bullion for immediate delivery rose 0.4 percent to $1,202.20 an ounce by 10:29 a.m. in London, according to Bloomberg generic pricing. The metal climbed on Nov. 21 to as much as $1,207.93, the highest since Oct. 30, as China cut rates.
Gold for February delivery rose 0.5 percent to $1,202.30 an ounce on the Comex in New York. Futures trading volumes were more than double the average for the past 100 days for this time of day, according to data compiled by Bloomberg.
Economic Divergence
A divergence between the economic outlook in the U.S., which celebrates Thanksgiving on Nov. 27, and economies in Europe and Asia is driving gains for the dollar. The Bloomberg Dollar Spot Index touched a five-year high before the release of U.S. data on gross domestic product, home pricesand consumer confidence today.
A stronger dollar typically curbs demand for bullion as a store of value, while rising rates reduces gold’s allure because the metal generally offers investors returns only through price gains.
“Thanksgiving is two days off and it probably is time for the market to take a bit of a breather, consolidate around here if it can and see what December brings,” David Govett, head of precious metals at brokerage Marex Spectron in London, said in an e-mailed note. “Obviously the dollar will play an important part and if that moves then so will the precious complex.”
ETP Holdings
Holdings in gold-backed exchange-traded products rose 1.6 metric tons to 1,617.8 tons as of yesterday, gaining for a second session, while still close to a five-year low, according to data compiled by Bloomberg.
Silver for immediate delivery advanced 1.4 percent to $16.7237 an ounce, rising for a fourth day in the longest run of gains since June 26. Platinum climbed 1.4 percent to $1,221.63 an ounce after dropping 1.9 percent yesterday. Palladium gained 0.5 percent to $796.25 an ounce.
Platinum and palladium supply probably will fall short of demand for a fourth year in 2015 as more usage in vehicles helps compensate for rebounding South African mine output, Johnson Matthey Plc said yesterday.
