Gold advanced, approaching an all-time high, as investors flocked to the precious metal to protect their wealth from ongoing turbulence in Europe and growing uncertainty in the global economy.
Bullion for immediate delivery strengthened as much as 0.3 per cent to $US1261 an ounce and traded at $US1257.15 an ounce in Singapore. The metal climbed to a record $US1262.50 an ounce on June 18. August-delivery futures were little changed at $US1258 an ounce. Gold futures in Shanghai gained to a record 276.7 yuan ($US40.54) a gram.
''It is clear that there is extremely strong interest in gold,'' said Gavin Wendt, senior resource analyst with MineLife in Sydney. ''This is all a direct consequence of investors seeing gold as a more attractive investment class, and this trend will only continue to grow.''
Gold, up 15 per cent this year, is set for a 10th annual advance, the longest run of gains since at least 1920 as central banks, pension funds and individual buyers seek to protect their assets from potential currency debasement. Gold may climb to $US1400 in 2010 should the current pace of investment continue, Goldman Sachs Group said last week.
Russia’s central bank bought 26.6 metric tons of gold in the last quarter, taking its holdings to 668.6 tons, and the Philippines increased holdings by 9.5 tons in March to 164.7 tons, the World Gold Council said on June 18. That followed purchases in 2009 by India, Mauritius and Sri Lanka.
Assets in the SPDR Gold Trust, the biggest exchange-traded fund backed by bullion, rose to a record 1307.96 tons last week, according to figures on the company’s website.
Yuan flexibility
China signaled on June 19 that it will allow a more flexible yuan, a move that may drive up prices of commodities as dollar-based imports become more affordable in the world’s biggest consumer.
Copper prices jumped 1.8 per cent in London and zinc soared 2.4 per cent, while precious metals that have industrial use also gained.
''The impact on China in the short term will be neutral for gold prices,'' Wallace Ng, executive director with Fortis Nederland NV in Hong Kong, said. A stronger yuan will benefit gold prices in the longer term because it will increase the purchasing power of Chinese investors, he said.
China should increase its holdings of precious metals and oil as it invests its foreign reserves, Yin Zhongqing, vice chairman of the finance committee of the National People’s Congress, said last week. Gold represents 1.6 per cent of the reserves held by China, according to the World Gold Council.
Bullion outperforms
Bullion has outperformed equities and bonds this year, while the euro slumped 14 per cent. A majority of Greeks believe the country may go bankrupt, an opinion poll showed. Spain has 24.7 billion euros of maturing debt in July and may need to use a financial lifeline from the European Union.
Gold will climb to a record $US1300 an ounce in the coming weeks as investors sell the dollar, according to Credit Suisse. Bullion may jump to $US1500 an ounce, 19 per cent more than the record $US1262.50 set on June 18, before investors see gold as a ''bubble,'' said Michael Macdonald, technical analyst with Credit Suisse, citing momentum indicators.
The metal’s 14-day relative strength index, which compares gains and losses on a weekly basis, advanced to a one-month high of 68.195 on June 18. A level of more than 70 is seen by some investors as a signal that prices are about to drop.
Hedge-fund managers and other large speculators increased their net-long position in New York gold futures in the week ended June 15, US Commodity Futures Trading Commission data showed.
Speculative long positions, or bets prices will gain, outnumbered short positions by 230,251 contracts on the Comex division of the New York Mercantile Exchange, the Washington-based commission said in its Commitments of Traders report. Net-long positions rose by 2853 contracts, or 1 per cent, from a week earlier.
Silver for immediate delivery was little changed at $US19.18 an ounce, palladium gained 0.9 per cent to $US494.50 an ounce, while platinum climbed 0.6 per cent to $US1597 an ounce.
Bloomberg
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