London: Gold traded near the highest in almost two months in London as investors weighed better physical demand against prospects for less US stimulus. Silver headed for the best week since 2011 after entering a bull market.
Gold is set for the biggest weekly gain in five even as signs the US economy is improving fueled speculation the Federal Reserve will start reducing stimulus. Silver rallied more than 20% since 27 June through on Thursday’s close, the common definition of a bull market.
Gold fell 19% this year as some investors lost faith in the metal as a store of value, wiping $56.2 billion from the value of bullion-backed exchange-traded products. Filings showed this week billionaire John Paulson cut his stake in the SPDR Gold Trust, the biggest bullion ETP, by 53% in the second quarter. The metal’s slump this year spurred purchases of jewelry and coins, particularly in Asia.
The break above $1,350 prompted a short-covering rally, even though expectations are still for the Fed to scale back stimulus, said Yang Xi, an analyst at Yongan Futures Co. in Hangzhou, China, referring to some investors closing bets on losses. Physical demand for gold rises and falls with the price. Silver seems better placed, as industrial demand should increase if the economy recovers.
Gold for immediate delivery lost 0.1% to $1,364.60 an ounce by 9:19 am in London. Prices reached $1,372.97, the highest since 19 June, and are up 3.8% this week. Bullion for December delivery was up 0.2% at $1,364 on the Comex in New York. Futures trading volume was about the average for the past 100 days for this time of day, data compiled by Bloomberg showed.
Gold ETP holdings fell 0.6 metric ton to 1,949.5 tons on Thursday, data compiled by Bloomberg show. Assets are up 1.2 tons so far this week, heading for the first weekly increase since February.
Physical demand will start to slacken off up here, and once the fresh buying is sated, lethargy may well set in again, David Govett, head of precious metals at Marex Spectron Group in London, said on Friday in an e-mail. I would buy those dips, but don’t get carried away that this is the start of a major bull market.
Silver for immediate delivery reached $23.188 an ounce, the highest since 22 May, and was last little changed at $23.019. Prices are up 12% this week, the most since October 2011, cutting this year’s plunge to 24%. Palladium fell 1.1% to $754.85 an ounce after Thursday’s climbing to a two- month high of $767.25. Platinum was little changed at $1,526 an ounce. It touched $1,533.10 on Thursday, the highest since 7 June. BLOOMBERG