Gold headed for a second weekly advance, the best showing since March, as optimism that global stimulus will be sustained countered a reduction in bullion- backed exchange-traded products.
Bullion for immediate delivery rose as much as 0.6 percent to $1,475.40 an ounce, and was at $1,471.55 at 9:38 a.m. in Singapore. The metal is 0.6 percent higher this week on signs of increased physical purchases. Gold had its worst month of losses since December 2011 in April after plunging into a bear market.
The European Central Bank cut borrowing costs to a record yesterday, while saying monetary policy “will remain accommodative for as long as needed.” The Federal Reserve on May 1 maintained the pace of its monthly asset purchases. Gold rallied for 12 years through 2012 as central banks around the world including the Fed ramped up stimulus to spur growth.
“Gold lifted after the ECB cut its main refinancing rate,” Lachlan Shaw, an analyst at Commonwealth Bank of Australia, wrote in an e-mail. “The recent fall in prices resulted in a surge of physical demand for coins and jewelry. If the U.S. economy continues to show improvement, we expect gold investment demand and prices to weaken further.”
ETP holdings fell to 2,262.665 metric tons yesterday, the least since October 2011, and are 0.9 percent lower this week, according to data compiled by Bloomberg. Assets have shrunk for the past 23 sessions, contracting by 369.3 tons this year.
Elliott Management Corp. said that gold remains the best store of value in an uncertain global economy even as its position in the metal has lost money this year, according to an addendum accompanying a first-quarter letter to investors. The $21.8 billion hedge-fund firm founded by Paul Singer joins John Paulson in sticking with gold after the metal plummeted 9.1 percent on April 15 in the worst slide since 1983.
While prices have rebounded from a two-year low of $1,321.95 on April 16 as physical demand from the U.S. to China and the Middle East increased, they are 5.8 percent below the April 11 close of $1,561.45 that preceded the slump.
Gold for June delivery climbed 0.2 percent to $1,470.70 an ounce on the Comex. Twenty analysts surveyed by Bloomberg expect bullion to drop next week, with nine bullish and four neutral, the biggest proportion of bears since February 2010.
Silver was little changed at $23.8415 an ounce, heading for a weekly loss. Platinum rose 0.4 percent to $1,504.60 an ounce, set for a second weekly advance and palladium was little changed at $694.45 an ounce, also poised for a second weekly climb.
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