Gold, little changed in London today, may gain for a second day as concern over the economic recovery fuels demand for bullion as a means of protecting wealth.
The dollar weakened against the euro before a U.S. report today forecast to show business activity expanded at a slower pace and after the European Central Bank said it would lend banks 131.9 billion euros ($161.5 billion). Gold is headed for its biggest quarterly advance since the end of 2007. Holdings in the world’s biggest gold-backed exchange-traded fund rose to a record yesterday.
“Sentiment is still sour,” said Andrey Kryuchenkov, an analyst at VTB Capital in London. “Scrap selling has also been fairly limited because most players fear more upside to prices amid ongoing uncertainty.”
Gold for immediate delivery added $3.82, or 0.3 percent, to $1,244.47 an ounce at 11:32 a.m. in London. Prices are up 12 percent this quarter. The metal for August delivery was 0.2 percent higher at $1,244.90 on the Comex in New York.
Bullion rose to $1,240.50 an ounce in the morning “fixing” in London, used by some mining companies to sell output, from $1,234.50 at yesterday’s afternoon fixing.
Bullion has climbed 13 percent this year, reaching a record $1,265.30 an ounce on June 21, as investors sought to protect their wealth from prolonged financial turbulence in Europe and on concern the global recovery may slow. The metal is set for a seventh straight quarterly gain, the best run since 1979. Gold rose to records this month in euros, pounds and Swiss francs.
European Bank Lending
The euro slid 9 percent against the dollar this quarter, the most since the third quarter of 2008. The MSCI World Index of equities fell 13 percent in the period, while the Reuters/Jefferies CRB Index of 19 raw materials slipped 6.2 percent through yesterday.
The Institute for Supply Management-Chicago Inc. in the U.S. is forecast to report today itsbusiness barometer fell to 59 this month from 59.7 in May, according to a Bloomberg survey. Figures greater than 50 signal expansion.
The dollar extended declines after the European Central Bank said it would lend banks 131.9 billion euros for three months, less than some analysts forecast and a sign that the region’s financial industry may be stronger than investors estimated. Banks tomorrow need to repay 442 billion euros in 12- month funds, the biggest amount ever awarded by the ECB and a key plank in its efforts to fight the financial crisis.
“Gold prices appear to have become less sensitive to the level of fear and more sensitive to dollar movements,” Filip Petersson, an analyst at Swedish bank SEB AB’s commodity unit, said in a report. Still, “a mountain of sovereign debt in the western world and growth concerns” are giving “rock solid support” to gold, he said.
ETF Record
Bullion has advanced in 2010 even as the dollar, which usually moves inversely to gold, has strengthened against the euro. Bullion gained 24 percent last year as the dollar weakened 2.5 percent.
Assets in the SPDR Gold Trust, the biggest ETF backed by bullion, gained 4.26 metric tons to a record 1,320.44 tons yesterday, according to the company’s website. Global holdings of the metal by ETFs rose 3.9 tons to an all-time high 2,067.7 tons yesterday, according to Bloomberg datafrom 10 providers.
“Demand for gold as a safe haven will remain strong, which should oppose any major declines in prices,” Eugen Weinberg, head of commodity research with Commerzbank AG, wrote in a report. “Due to the currently high price level, profit-taking by short-term oriented investors is increasing.”
Silver for immediate delivery in London added 1.3 percent to $18.73 an ounce, increasing its gain this quarter to 7.2 percent. That’s a sixth straight quarterly advance, the best streak since the beginning of 1980.
Platinum was 0.5 percent lower at $1,536.25 an ounce, and palladium was up 1.1 percent at $457.42 an ounce. Both metals are set for their first quarterly loss since the end of 2008.
To contact the reporters on this story: Kyoungwha Kim in Singapore at Kkim19@bloomberg.net;Nicholas Larkin in London at nlarkin1@bloomberg.net.