Gold Rises on Investment Demand as Global Equities Drop

Gold futures rose as a drop in global equities boosted demand for the precious metal as an alternative
investment.

Shares fell as tens of thousands of protesters took the streets in Hong Kong, pressing for free and open elections. Gold has slumped 5.3 percent in September, on pace for its biggest monthly loss this year, amid a rally to record for U.S. stocks and as the dollar climbed to the highest since 2010 against a basket of 10 currencies.

The metal is moving closer to erasing its 2014 advance amid low inflation and bets that the U.S. recovery will prompt the Federal Reserve to boost interest rates. While bullion reached this year’s peak in March as political tensions escalated in Ukraine, the demonstrations in Hong Kong aren’t “enough to turn the market” from its bearish trend, said Jordan Kotick, the head of cross-asset strategy at RBC Capital Markets in Toronto.



“You’re always going to have, in any geopolitical uncertainty, a small flight to quality,” Kotick said in a telephone interview. “To break out of a two-year range, you really need a catalyst. Hong Kong could break it out of that range, but 24-48 hours of protests is not enough.”

Gold futures for December delivery rose 0.3 percent to $1,218.80 an ounce at 1:42 p.m. on the Comex in New York. The price this quarter dropped 7.8 percent, heading for the first loss this year.

The MSCI All-Country World Index fell as much as 0.9 percent today. Gold climbed 1.4 percent this year, trailing gains in the Bloomberg Dollar Spot Index and global stocks.

U.S. Economy

Prices earlier rose as much as 0.7 percent and pared gains after a report showed U.S. personal spending rebounded in August. Last week, the government said the economy in the second quarter expanded by the most since 2011. Consumer spending accounts for about 70 percent of gross domestic product.

Demand for precious metals as a protection of wealth has been eroded by the outlook for a strengthening U.S. economy. The Fed on Sept. 17 raised its outlook for interest rates, crimping demand for an inflation hedge. Holdings in the SPDR Gold Trust, the biggest exchange-traded product backed by the metal, are at the lowest since December 2008.

Silver futures for December delivery rose 0.2 percent to $17.567 an ounce. The price this month dropped 9.9 percent and 17 percent in the quarter, heading for the biggest slumps since June 2013.

On the New York Mercantile Exchange, platinum futures for January delivery rose 0.6 percent to $1,309.50 an ounce, after touching $1,296.50, the lowest for a most-active contract since June 28, 2013.

Palladium futures for December delivery climbed 0.7 percent to $789.50 an ounce, heading for a September loss of 13 percent, which would be the biggest drop in three years.

Source Url : http://www.bloomberg.com/news/2014-09-29/gold-trades-near-lowest-level-since-january-on-dollar-s-strength.html