Gold rises to highest level since October as U.S. rates assessed

By Glenys Sim, Bloomberg

13 Jan, 2015 – Gold extended gains to the highest level in almost 12 weeks as investors assessed the strength of the U.S. economy amid slumping oil prices, and the impact on the timing of higher borrowing costs. Silver climbed to a one-month high.

Bullion for immediate delivery rose as much as 0.5 percent to $1,239.34 an ounce, the highest price since Oct. 23, and traded at $1,237.09 at 12:07 p.m. in Singapore, according to Bloomberg generic pricing. The metal is trading higher for a third day as a report last week showed falling incomes in the world's largest economy even as hiring accelerated.

Oil prices at the lowest in 5 1/2 years are hurting global equities and threatening to push inflation further below the Federal Reserve's 2 percent target. The Bloomberg Dollar Spot Index traded below a record close as data this week may show the cost of living in the U.S. slid by the most in almost six years and retail sales fell in December, spurring speculation the Fed may hold back from the first rate increase since 2006.

"The short-term direction of gold is being driven by the dollar, oil and general risk sentiment in the market," said Zou Lihu, an analyst at Citics Futures Co. in Shenzhen, a unit of China's biggest listed broker. "The longer term direction for gold will still come from the outlook for U.S. interest rates."

Federal Reserve Bank of San Francisco President John Williams, who will vote on policy this year, said raising rates in June would be a close call amid "strong momentum" in the labor market and weaker wage gains. Atlanta Fed chief Dennis Lockhart, also a voting member of the policy-setting Federal Open Market Committee this year, has said that rate liftoff in mid-2015 would probably be justified.

Europe Woes

Gold priced in euros rose to the highest since September 2013 as the European Central Bank moves toward adding stimulus to fight deflation and revive growth amid political uncertainty in Greece. The country that triggered the region's sovereign-debt crisis in 2009 is preparing for a Jan. 25 election that Prime Minister Antonis Samaras has said may lead to an exit from the currency bloc should the opposition Syriza party win.

Gold for February delivery added as much as 0.8 percent to $1,242 an ounce on the Comex in New York, the highest since Oct. 23. Assets in the SPDR Gold Trust, the world's largest exchange-traded product backed by bullion, were unchanged yesterday after rising on Jan. 9 by the most since July.

Silver for immediate delivery climbed as much as 1.7 percent to $16.858 an ounce, the highest level since Dec. 15. Platinum rose 0.2 percent to $1,243.75 an ounce, advancing for a fourth day in the longest rally since July. Palladium fell 0.1 percent to $809.75 an ounce, after rising yesterday to $814.75, the highest level since Dec. 29. – BLOOMBERG