Gold Rebounds From 8-Month Low as Decline Spurs Purchases

New York (Sept 15)  Gold rose for the first time in six days in New York on speculation that a decline to an eight-month low will spur more purchases.

Bullion capped a 2.8 percent drop last week as the dollar strengthened and data showed that U.S. retail sales rose in August by the most in four months. The metal’s 14-day relative-strength index dropped below the level of 30 last week, signaling to some traders that prices may be poised to rebound.

Gold is heading for the first quarterly loss this year as the Bloomberg Dollar Spot Index climbed 4.8 percent since the end of June, reaching a 14-month high today. The metal has fallen as signs of an improving U.S. economy added to the case for the Federal Reserve, which begins a two-day policy meeting tomorrow, to move closer to raising interest rates.

There’s “some short covering and bargain hunting seen down at the lows,” David Govett, head of precious metals at Marex Spectron Group in London, said in a note today, referring to closing out bearish bets. Still, there’s less need to hold gold “whilst the U.S. economy continues to push strongly ahead, buoying the U.S. currency” and increasing prospects of higher borrowing costs, he said.

Gold for December delivery rose 0.4 percent to $1,236 an ounce by 7:35 a.m. on the Comex in New York. It fell to $1,226.30 earlier today, the lowest since Jan. 9. Gold for immediate delivery gained 0.5 percent to $1,235.78 an ounce in London, according to Bloomberg generic pricing.

Futures trading volume was 18 percent below the average for the past 100 days for this time of day, data compiled by Bloomberg show.

Money Managers

Money managers reduced bullish bets on gold for a fourth straight week to 71,376 contracts, the lowest since June, U.S. Commodity Futures Trading Commission data show.

Bullion slid 8.2 percent since reaching an almost four-month high on July 10 amid demand for a haven. U.S. Secretary of State John Kerry meets Russian Foreign Minister Sergei Lavrov today after pro-Russian rebels continued to clash with Ukraine troops in several locations including the Donetsk airport. Clashes have occurred daily since a truce took effect Sept. 5.

Silver for delivery in December added 0.3 percent to $18.655 an ounce in New York. It reached $18.455 on Sept. 12, the lowest since June 28, 2013. Platinum for delivery in October rose 0.2 percent to $1,372.90 an ounce, after touching $1,356.30 on Sept. 12, the lowest this year.

Palladium for delivery in December gained 1.3 percent to $847.10 an ounce. Prices reached a 13-year high of $913 earlier this month amid concern that supplies from Russia, the largest producer, may be disrupted. They since retreated to an 11-week low of $822 on Sept. 12.

Source: Bloomberg