London - Gold gained for a second day in London on speculation the plunge to a 34-month low and the biggest quarterly drop on record will spur physical demand.
Palladium advanced.
Bullion slid 23 percent in London last quarter, the most since at least 1920, as Federal Reserve Chairman Ben S. Bernanke said that the Fed may slow its bond-buying program this year.
A technical tool shows gold is near a level that indicates to some analysts that prices may rebound.
There’s “strong” physical demand with bullion below $1,600 an ounce, Standard Bank Plc’s SBG Securities (Pty) Ltd. unit said in a report today.
The metal slipped 26 percent this year, wiping $60.1 billion from the value of gold-backed exchange-traded product holdings, as some investors lost faith in it as a store of value.
While gold could still fall further, a rebound is possible because stimulus tapering may take longer than some expect and gold prices are nearing production costs, Macquarie Group Ltd. wrote in a report today.
“The market is focusing on the US Fed’s monetary policy,” David Davis, a Johannesburg-based analyst at SBG Securities, wrote today in a report.
“In the longer term, we are likely to see a marginal upward trend in the price coming off a lower base, supported by physical demand and sentiment surrounding the likelihood of a reduction in global production brought about by low prices.”
Gold Price
Gold for immediate delivery rose 0.6 percent to $1,242.54 an ounce by 10:12 a.m. in London. It reached $1,180.50 on June 28, the lowest since August 3, 2010.
Bullion for August delivery gained 1.4 percent to $1,241.40 on the Comex in New York.
Futures trading volume was 35 percent above the average in the past 100 days for this time of day, according to data compiled by Bloomberg.
Gold’s 14-day relative strength index was last week below the level of 30 that indicates to some analysts who study technical charts that a rebound may be imminent.
It was at 31.6 today.
The metal’s 60-day historical volatility was at 32.7 percent today, the highest since October 2011.
Global gold ETP holdings declined 3.3 metric tons on June 28 to 2,045.4 tons, the lowest since May 2010, data compiled by Bloomberg show.
Investors sold 586.5 tons this year.
Gold as much as doubled from 2008 to a record $1,921.15 in September 2011 as the US central bank led nations in cutting interest rates and buying debt.
Bernanke said June 19 that the Fed may reduce its $85 billion of monthly purchases this year and end the program in 2014.
Lower Prices
“We could see gold move back toward $1,100 an ounce in the short term,” Mark Pervan, an analyst at Australia & New Zealand Banking Group Ltd., said on Bloomberg Television’s “First Up” with Susan Li, citing a US recovery and slower economic growth in China.
“I don’t think it’s sustainable at that level. Lower prices will induce strong demand in Asia.”
Silver for immediate delivery was little changed at $19.6828 an ounce in London, after reaching $18.2208 on June 28, the lowest since August 2010. It slid 31 percent last quarter, the most since 2008, and is the worst performer in the Standard & Poor’s GSCI gauge of 24 commodities this year.
Platinum rose 0.4 percent to $1,345.74 an ounce in London. Prices declined 15 percent in the three months through June and reached $1,294.18 on June 28, the lowest since October 2009.
Palladium was up 2.8 percent at $677.72 an ounce.
It fell 15 percent in the second quarter and was up for a third day.
Platinum and palladium are used in jewelry and pollution- control devices in cars.
Palladium is favored for use in gasoline vehicles, with North America the biggest user of the metal in autocatalysts.
An industry report today will show US manufacturing expanded in June, economists surveyed by Bloomberg said. - Bloomberg News