Gold extends gains on stimulus hopes
Singapore, July 15, 2013
Gold extended gains on Monday after posting its biggest weekly percentage increase in nearly two years, as fears eased that the US Federal Reserve would wind down its stimulus programme early.
Fed Chairman Ben Bernanke said last week that a highly accommodative policy was needed for the foreseeable future, bolstering bullion which is often seen as a hedge against inflation.
"People are still buying after Bernanke's assurance," said a Hong Kong-based trader. "They were expecting the tapering (in stimulus) to begin in September but now they think there is a possibility of it happening only next year."
Prices were also buoyed as Chinese GDP data for the second quarter matched expectations at 7.5 per cent.
Spot gold had risen 0.5 per cent to $1,290.88 an ounce by 0309 GMT, after advancing nearly 5 per cent last week - the most since October, 2011. But it is still down nearly 25 per cent this year.
US gold gained $12.50 to $1,290.10. Silver rose about 1 per cent, while platinum and palladium were hovering near their highest in more than three weeks.
"It's Bernanke that is still impacting liquidity in the markets," said Han Pin Hsi, global head of commodities research at Standard Chartered Bank in Singapore.
"I think we are forming a base (in gold prices) here at current levels. We are still more bullish compared to these prices."
But he added that outflows from gold exchange traded funds would have to stop before gold could climb much higher.
Holdings in SPDR Gold Trust, the world's largest gold-backed ETF, are near four-year lows. The fund has seen outflows of over 13 million ounces, or about $17 billion at current prices, so far this year. - Reuters