London- Gold and silver rose from their lowest levels since September 2010 on speculation the slump may spur purchases. Bullion is still set for its worst week since September 2011 after Federal Reserve Chairman Ben S. Bernanke said that the central bank may start curbing stimulus.
Bullion slid 4.9 percent yesterday, a day after Bernanke said the central bank may start reducing $85 billion in monthly debt buying this year and end the program in 2014.
Prices reached $1,269.46 an ounce today, the cheapest since September 16, 2010.
Gold’s 14-day relative strength index was at 29.1, below the level of 30 that indicates to some analysts who study technical charts that a rebound may be imminent.
Bullion slid 23 percent this year, heading for the biggest annual drop since 1981, as some investors lose faith in it as a store of value and as speculation grew that the Fed will taper debt-buying that helped the metal cap a 12-year bull run last year.
It’s too soon to predict whether the surge in demand around the world that followed gold’s plunge in April and pushed prices higher will be repeated as investors who were keen buyers then have become more cautious, according to CPM Group.
“There’s always physical demand that might come in a bit stronger, considering the move we had,” Marc Ground, a commodity strategist at Standard Bank Plc in Johannesburg, said by phone.
“I don’t think we’ll get back to where we were anytime soon. The gold market is getting used to the idea that liquidity won’t be as forthcoming anymore.”
Gold Price
Gold for immediate delivery rose 0.8 percent to $1,295.60 by 10:04 a.m. in London.
Prices are down 6.8 percent this week.
Bullion for August delivery added 0.6 percent to $1,293.60 on the Comex in New York.
Futures trading volume was 79 percent above the average in the past 100 days for this time of day, according to data compiled by Bloomberg.
CME Group Inc. raised increased the margin requirements on Comex gold trading, making it more expensive for speculators to trade.
It increased the minimum cash deposit for futures by 25 percent to $8,800 per 100-ounce contract at today’s close, it said yesterday.
“There is no doubt that the bull market in gold has had its back broken and its day in the sun is long gone,” David Govett, head of precious metals at Marex Spectron Group in London, said today in a report.
Gold’s direction “rests for the moment on whether or not physical buying from Asia emerges down here.”
Commodities Performance
The Standard & Poor’s GSCI gauge of 24 commodities dropped 4.3 percent since the start of January, the MSCI All-Country World Index of equities rose 3.9 percent and the U.S. Dollar Index added 2.7 percent.
A Bank of America Corp. index shows Treasuries lost 2.4 percent.
Silver for immediate delivery gained 0.5 percent to $19.8022 an ounce in London after falling to $19.3993, the lowest since September 2010.
It’s down 10 percent this week, the most since April. An ounce of gold bought as many as 65.4626 ounces of silver in London, the most since August 2010.
Gold entered a bear market in April, extending the retreat from its all-time high of $1,921.15 in September 2011.
Global holdings in exchange-traded products fell 5.1 metric tons to 2,106.1 tons yesterday, the lowest since March 2011, data compiled by Bloomberg show. The 525.9-ton drop this year is valued at about $21.9 billion.
“The worst of the current round of decline is probably behind us, as gold prices may stabilize and rebound,” Jeffrey Christian, managing partner at CPM, said in an interview in Zhaoyuan, China today.
“It’s going to be very important to see in the next few days how enthusiastic investors are. If they signal they are waiting for still lower prices, that will be a very negative signal.”
Gold Miner
The slump in gold prices triggered a drop in related equities. Newcrest Mining, Australia’s biggest producer, slid 3.7 percent in Sydney, taking this year’s loss to 53 percent.
It said this month it will write down the value of its assets by as much as A$6 billion ($5.5 billion) after prices slid.
Platinum added 0.1 percent to $1,364.88 an ounce in London, after falling to $1,334.28, the lowest since November 2009. Prices are down 5.6 percent this week. Palladium was up 2 percent at $676.18 an ounce, rebounding from $655.25, the lowest since April 18. It dropped the previous six days and is set for a 7.6 percent weekly decline. Both the metals are used in jewelry and pollution-control devices in cars. - Bloomberg News