Gold Rises to Highest Since October as U.S. Rate Outlook Weighed

By Laura Clarke and Glenys Sim  Jan 13, 2015 12:23 PM GMT+0200

Bloomberg

Gold extended gains to the highest in almost 12 weeks as investors assessed the timing of higher borrowing costs and the strength of the U.S. economy amid slumping oil prices. Silver climbed to a four-week high.

Bullion rose for a third day after U.S. data last week showed falling incomes even as hiring accelerated. Fed Bank of San Francisco President John Williams has said raising rates in June would be a close call amid “strong momentum” in the labor market and weaker wage gains.

Oil prices that have slumped to the lowest in 5 1/2 years may spur speculation that the Fed will hold back from raising interest rates. The Bloomberg Commodity Index has fallen to a 12-year low, lowering inflation expectations and raising the risk of deflation. That may prompt policy makers to delay rate increases.

“The longer-term direction for gold will still come from the outlook for U.S. interest rates,” said Zou Lihu, an analyst at Citics Futures Co. in Shenzhen. “The short-term direction of gold is being driven by the dollar, oil and general risk sentiment in the market.”

Bullion for immediate delivery rose as much as 0.9 percent to $1,244.29 an ounce, the highest price since Oct. 23, and traded at $1,239.06 at 10:01 a.m. in London, according to Bloomberg generic pricing. Gold for February delivery rose 0.5 percent to $1,239.20 in New York.

ECB Stimulus

Gold priced in euros rose to the highest since September 2013 as the European Central Bank moves toward adding stimulus to fight deflation and revive growth amid political uncertainty in Greece. The country that triggered the region’s sovereign-debt crisis in 2009 is preparing for a Jan. 25 election that Prime Minister Antonis Samaras has said may lead to an exit from the currency bloc should the opposition Syriza party win.

“It just seems that people are looking at precious metals as a comparatively cheap investment at the beginning of the year,” David Govett, head of precious metals at broker Marex Spectron Group in London, said in a note today. Some investors may sell the metal if it climbs to $1,250, he said.

Silver for immediate delivery rose as much as 2.8 percent to $17.054 an ounce, the highest since Dec. 15, and last traded at $16.8882. Platinum and palladium were little changed.

To contact the reporters on this story: Laura Clarke in London at lclarke24@bloomberg.net; Glenys Sim in Singapore at gsim4@bloomberg.net

To contact the editors responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net Nicholas Larkin, John Deane