Gold rose toward a six-month high on Tuesday, lifted by a weak dollar following Moody's warning on US creditworthiness and strong investment buying in gold exchange-traded products. The metal received a boost after credit rating agency Moody's said the United States may lose its "triple-A" debt rating if next year's budget negotiations do not produce policies that decrease debt.
Gold investor sentiment was already bullish after last week's disappointing US payrolls data raised hopes that the Federal Reserve could unveil new stimulus as early as Thursday at its policy meeting. "Every piece of bad news seems to be good for gold, only because it translates into something that the Fed has to do to get this economy off the ground," said Anthony Neglia, president of Tower Trading and a COMEX gold options floor trader. Heavy positioning in December call options at strike prices above $1,800 an ounce suggests that many investors believe gold could rise further by the end of the year, Neglia said.
Spot gold was up 0.4 percent at $1,731.20 an ounce by 11:59 a.m. EDT (1559 GMT). The price has risen 2.5 percent so far in September to hover near its highest in six months. US gold futures for December delivery were up $2 at $1,733.80 an ounce, with trading volume on track to finish below its average, preliminary Reuters data showed.
Silver rose 0.6 percent to $33.51 an ounce. Gold also benefits from increased expectations a German court will back the euro zone bailout fund. However, it also means that any glitch could unleash sharp moves in stocks, bonds and the euro. Economic growth and, specifically, job creation, have been patchy enough to warrant a signal from Fed policymakers that they could resort to buying bonds to subdue borrowing rates and free up the flow of credit through the financial system. The Fed has employed this tactic, known as quantitative easing, on two occasions since late 2008.
The Reuters-Jefferies CRB index of 19 commodities has gained over 2 percent to reach its highest since late March. The rise in the gold price over this period has been driven largely by investors, rather than central banks or retail consumers. Holdings of bullion in exchange-traded products (ETPs), often used as a gauge of investor appetite for gold, rose by 91,932 ounces on the day to a record 72.49 million ounces, following broad-based inflows into most major ETPs.
UBS strategist Edel Tully said in a note that strong buying in gold ETPs has helped offset worries that investors might take profit following a sharp increase in bullish bets in US gold futures by hedge funds and money managers. Among platinum group metals, platinum climbed 0.7 percent to $1,600.80 an ounce, while palladium was up 1.3 percent at $671.47 an ounce.
Comments
Comments are closed.