Gold and Precious Metal News

Gold Advances in New York as Lower Prices Spur Investor Buying

June 11, 2010, 8:43 AM EDT

By Nicholas Larkin and Glenys Sim

June 11 (Bloomberg) -- Gold gained for the first time in three days in New York as lower prices spur buying from some investors on concern that Europe’s fiscal crisis might linger.

Gold declined 1.9 percent the past two days after reaching a record $1,254.50 an ounce on June 8. Holdings in the world’s biggest bullion-backed exchange-traded fund rose to an all-time high. The euro was little changed against the dollar today.

“Yesterday’s drop was seen as another opportunity to buy gold,” said Bayram Dincer, a commodity analyst at LGT Capital Management in Pfaeffikon, Switzerland. “Persistent high holdings and new inflows into ETFs at current prices are supporting” bullion, he said.

Gold futures for delivery in August added $2.40, or 0.2 percent, to $1,224.60 an ounce at 8:22 a.m. on the Comex in New York. The metal is up 0.6 percent this week. Gold for immediate delivery in London was 0.3 percent higher at $1,223.20 an ounce.

The metal increased to $1,220.50 an ounce in the morning “fixing” in London, used by some mining companies to sell output, from $1,217.50 at yesterday’s afternoon fixing. Spot prices gained in six of the previous seven weeks.

Gold is up 12 percent this year and on course for a 10th straight annual advance, the longest run of gains since at least 1920. It has climbed amid speculation that debt-cutting measures by European nations will slow growth. Seventeen of 25 traders, investors and analysts surveyed by Bloomberg said gold will rise next week, five forecast lower prices and three were neutral.

‘Stretched to Its Limit’

“What gold is telling you is that the currency system, the debt system, is stretched to its limit, and it doesn’t matter which Western currencies you choose,” Juerg Kiener, Singapore- based chief investment officer of Swiss Asia Capital Pte, said in a Bloomberg Television interview. Gold has a “long way to go” before reaching “bubble territory,” he said.

While Europe’s fiscal crisis has driven the euro 15 percent lower this year against the dollar, the U.S. currency and gold are moving in the same direction. Gold priced in dollars and the U.S. Dollar Index, a six-currency gauge of the greenback’s value, are poised to advance together for a third quarter in a row.

European Central Bank President Jean-Claude Trichet said the bank will extend its offerings of unlimited cash and keep buying government bonds as it tries to ease tensions in money markets and fight the European debt crisis.

“Gold is likely to encounter repeated resistance at the $1,250 mark over the coming month,” Citigroup Inc. analysts including David Thurtell said today in a report. “The seasonal low period for buying in India is upon us, which will take some of the heat out of the market.”

Holdings in the SPDR Gold Trust, the biggest ETF backed by bullion, rose 7.61 metric tons to a record 1,306.14 tons yesterday, according to the company’s website. The fund’s assets are up 15 percent this year.

“There may be more downside risks for gold,” said Wong Eng Soon, Singapore-based analyst with Phillip Futures Pte. Still, “considering that gold was at $1,250 mere days ago, gold at $1,200 will be attractive to investors who will be tempted to take up long positions on bargain-hunting.”

Silver for July delivery was 0.2 percent higher at $18.395 an ounce. The metal may outperform gold prices in the “medium term” on increasing industrial demand, and may reach $20 in the next six to 12 months, according to Citigroup. Platinum for July delivery rose 0.7 percent to $1,547 an ounce. Palladium for September delivery gained 1.1 percent to $454 an ounce.