Singapore - Gold is set to halt two months of losses as concern that China may be slowing triggered a rout in global financial markets and drew investors to safe haven assets, countering prospects for an interest-rate increase in the US.
Bullion for immediate delivery traded at $1 133.63 an ounce at 08:50 in Singapore from $1 133.60 Friday, when the metal completed a weekly drop of 2.3%, according to Bloomberg generic pricing.
Prices have risen 3.5% in August, on track for the best monthly advance since January, as a surprise devaluation of China’s currency fuelled concern that the world’s second-largest economy may be in worse shape than previously thought.
Holdings in bullion-backed exchange-traded funds rose to a one-month high on August 27 as the MSCI All-Country World Index of equities headed for the worst monthly performance since May 2012 and a gauge of 22 raw materials was set to decline for a second month.
Only lean hogs performed better than gold on the Bloomberg Commodity Index in August. Turmoil in financial markets has clouded the outlook for US monetary policy, with traders betting on a 38% chance the Federal Reserve will raise rates at its September meeting, down from 48% two weeks earlier.
“I believe that there’s little near-term prospect for a US rate rise,” Gavin Wendt, a Sydney-based senior resource analyst at Mine Life, said in an email. “The Fed keeps talking tough on rates, but in reality I don’t believe the US economy’s recovery is strong enough for the Fed to take the risk.”
Gold is still 4.3% lower this year as expectations of tighter US monetary conditions curb the appeal of the metal which does not pay interest or offer returns, unlike competing assets.
Fed vice-chairperson Stanley Fischer indicated policy makers are open to increasing borrowing costs next month, saying on August 29 that there is “good reason” to believe inflation will accelerate.
Gold futures for December delivery slid 0.1% to $1 133/oz on the Comex, up 3.5% this month. Speculators more than tripled their net-bullish position to 44 271 futures and option contracts in the week ended August 25, according to Commodity Futures Trading Commission data released three days later.
In China, the world’s largest bullion consumer, metal of 99.99% purity climbed 0.2% to 233.75 yuan a gram on the Shanghai Gold Exchange.
Silver for immediate delivery fell 0.5% to $14.523/oz, poised for a 1.8% drop in a third month of declines. Spot platinum dropped 1.4% to $1 003.81/oz, trimming the first monthly increase since April.
Palladium was little changed at $588.10/oz, set for a fourth monthly retreat.