Gold advances as investors pile into ETFs

(iStock)
(iStock)

Singapore - Gold rebounded from the biggest weekly drop this year as investors piled into bullion-backed exchange-traded funds, lifting global holdings to the highest since 2013, and as the dollar held declines.

Bullion for immediate delivery rose as much as 0.6% to $1 265 an ounce, and was at $1 264.29 at 08:36, according to Bloomberg generic pricing. Last week, the metal sank 4.5%, the most since the period to November 6, as investors debated prospects for higher US rates.

Gold rallied 25% in the first half as ETF holdings surged, and the increase in assets last week signalled there’s still demand for the metal even as some investors anticipate higher US borrowing costs. While futures now indicate a 64% chance of a hike in December, the ETFs have expanded to 2 046.4 metric tons, the highest since June 2013.

“The correction that we saw last week was probably somewhat overdone,” David Lennox, a resources analyst at Fat Prophets in Sydney, said by phone.

“We’re just seeing a bit of a technical adjustment on the back of the fact that we’re still possibly not going to have an interest rate rise in 2016.”

The Bloomberg Dollar Spot Index, which tracks the currency against 10 major peers, was 0.1% lower after a 0.2% drop on Friday. The decline followed data showing the US added 156 000 jobs in September, compared with a median forecast of 172 000 in a Bloomberg survey of economists.

Goldman’s view

Goldman Sachs has said that a drop in gold prices significantly below $1 250/oz would present investors with a strategic buying opportunity, with the metal offering protection against risks to global growth and limits to central banks’ effectiveness.

As prices fell last week, traders cut bets on a rally by the most since late May. The net-long position in gold futures and options fell 22% to 205 176 for the week to October 4, according to Commodity Futures Trading Commission data released three days later.

In China, prices declined as trading restarted after a week’s holiday. Bullion of 99.99% purity slumped 4.2% to $1 267.05/oz. Shanghai Gold Exchange.

On the Shanghai Futures Exchange, gold for December delivery fell 4.1% to 273.65 yuan a gram, while silver tumbled as much as 7.4% to 3 952 yuan a kilogram, the most since April 2013. On global markets, silver climbed 1%, platinum added 0.5% and palladium advanced 0.8%.

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