Gold rose for the first time in four days in New York on speculation lower prices are boosting physical demand.
Bullion fell for a third consecutive day yesterday, the longest run since November, after minutes of the Federal Reserve’s December meeting showed some officials saw diminishing economic benefits from purchasing debt. The dollar was little changed after reaching a four-month high versus 10 major currencies before a report tomorrow that may say U.S. employers continued to add positions last month.
The Fed minutes didn’t describe a set schedule for the pace of asset-purchase reductions after policy makers cut monthly buying to $75 billion from $85 billion, citing improvement in the labor market. While gold tumbled 28 percent last year, the most since 1981, lower prices boosted physical demand. The U.K.’s Royal Mint said yesterday it ran out of 2014 Sovereign gold coins as lower prices spurred demand.
“Demand for gold coins and bars was very strong last year on account of the falling prices, a trend which appears to be continuing at the start of the year,” Commerzbank AG wrote today in a report. Still, continued investor sales though gold- backed funds are continuing to pressure prices, the bank said.
Bullion for February delivery added 0.3 percent to $1,228.80 an ounce by 7:40 a.m. on the Comex in New York. Futures trading volume was 46 percent below the average for the past 100 days for this time of day, data compiled by Bloomberg showed. Gold for immediate delivery rose 0.3 percent to $1,229.84 in London.
Bullion reached a six-month low of $1,181.40 on Dec. 31, before rebounding as much as 5.6 percent to a three-week high of $1,247.70 on Jan. 6. Prices increased as some investors closed out bearish bets and physical demand increased, UBS AG wrote in a report two days ago. The premium for immediate delivery in China climbed to $31.21 an ounce on Jan. 7, the highest in more than two weeks. It was at $11.02 today.
“We expect movement in gold to be constrained as caution is likely to prevail ahead of the release of the U.S. monthly payrolls data later tomorrow,” Abhishek Chinchalkar, an analyst at Mumbai-based AnandRathi Commodities Ltd., said in a report.
Holdings in gold-backed exchange-traded products are at the lowest since October 2009, data compiled by Bloomberg show. Bank of America Corp. cuts its average gold forecast for this year by 11 percent to $1,150, partly because inflation has failed to accelerate, it said in a report today. The bank reduced its 2014 silver estimates by 21 percent to $18.38 an ounce.
Silver futures for March delivery rose 0.4 percent to $19.615 an ounce in New York. Platinum for April delivery increased 0.4 percent to $1,419.70 an ounce. Palladium futures for March delivery were little changed at $738.45 an ounce.