BLOOMBERG: Gold Gains After Price Drop as Investors Weigh Buying, Fed Plans
By Glenys Sim - Jun 24, 2013 10:46 PM ET
Gold rose after slumping to the lowest levels since September 2010 as investors weighed the prospect of increased purchases against reduced monetary stimulus by the U.S. Federal Reserve.
Cash bullion rose as much as 0.7 percent to $1,291.47 an ounce and was at $1,285.93 at 10:38 a.m. in Singapore, after falling 1.1 percent yesterday. Gold’s 14-day relative strength index was at 29.5, below the level of 30 that indicates to some analysts who study technical charts that a rebound may be near. Morgan Stanley lowered its price forecasts through 2018.
Gold tumbled to $1,269.46 last week, the cheapest since Sept. 16, 2010, after Fed Chairman Ben S. Bernanke said that the central bank may slow its asset purchase program if the U.S. economy continues to improve. The Fed currently buys $85 billion of Treasury and mortgage debt a month. Holdings in exchange-traded products declined to 2,094.647 tons yesterday, the least since June 2010, according to data compiled by Bloomberg.
“Although we expect a positive physical demand response to eventually cushion gold’s drop, we do not believe it will be of the scale or magnitude of the reaction in April,” James Steel, an analyst at HSBC Securities (USA) Inc., wrote in a note. “Price-sensitive buyers may wait for a well-defined bottom before entering the market.”
Gold entered a bear market in April, unleashing a purchasing frenzy from China to India and the U.S. Prices have fallen 23 percent this year after rallying for 12 years as investors lost faith in the metal as a store of value. Morgan Stanley cut its 2013 target to $1,409 an ounce from $1,487, lowered its prediction for 2014 to $1,313 from $1,563, and trimmed its 2015 estimate to $1,300 from $1,450.
Gold for August delivery rose as much as 0.9 percent to $1,287.90 an ounce on the Comex, before trading at $1,284.60. ETP assets are down 20 percent in 2013 after climbing every year since the first product was listed in 2003, with more than $55 billion erased from the value of the funds, as “waning investor faith has now turned more serious,” said Morgan Stanley.
Cash silver traded at $19.7055 an ounce from $19.6940 yesterday, when it dropped 2.1 percent. Spot platinum gained 0.7 percent to $1,343.65 an ounce, after tumbling to the lowest since November 2009 yesterday. Palladium climbed 0.3 percent to $663.25 an ounce.
To contact the reporter on this story: Glenys Sim in Singapore at gsim4@bloomberg.net
To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net
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