Gold swings as investors weigh stimulus against increased demand

Gold has slumped 18 percent this year

Gold swung between gains and losses as investors weighed expectations that the U.S. Federal Reserve will start to curb stimulus against increasing physical demand. Platinum headed for the best run of weekly gains since 2006.

Spot gold gained and fell 0.3 percent, and was little changed at $1,374.95 an ounce at 9:27 a.m. in Singapore. Prices rose to a two-month high of $1,384.55 on Aug. 19. The volume for Shanghai’s benchmark spot contract climbed to the highest in almost three weeks, while assets in the biggest exchange-traded product held steady. Gold for December delivery climbed 0.3 percent to $1,374.80 an ounce on the Comex in New York.

Gold has slumped 18 percent this year, entering a bear market in April, as investors sold the metal at record pace from ETPs. A Bloomberg survey showed gold traders are the most bearish in nine weeks after Federal Reserve policy makers backed plans to cut the $85 billion in monthly asset purchases, according to minutes released this week. The Bloomberg U.S. Dollar Index was little changed after a two-day advance.

“The Fed minutes have increased expectations that stimulus will be scaled back and that has certainly weighed on gold,” said Lv Jie, an analyst at Cinda Futures Co., a unit of one of four funds in China created to buy bad debt from banks. “Gold remains well-bid in Asia, which should support prices.”

In China, volumes for gold of 99.99 percent purity jumped to 14,872 kilograms yesterday, the highest since Aug. 2, according to data from the Shanghai Gold Exchange. Data yesterday showed that a preliminary Chinese manufacturing index unexpectedly rose in August from an 11-month low.

Indonesian Demand

Gold jewelry demand in Indonesia, Southeast Asia’s biggest buyer, may climb to a four-year high of 40 metric tons this year as prices slump and the middle class expands, according to a forecast from the Indonesian Goldsmiths and Jewelers Association. That’s a 30 percent gain from 2012, World Gold Council data show.

Holdings in the SPDR Gold Trust were unchanged yesterday at 913.52 metric tons, after last week capping the first weekly gain this year. Assets have shrunk 32 percent this year, erasing $32.4 billion from the value of the fund.

Platinum was little changed at $1,542 an ounce after climbing to $1,545.15, the highest since April 10. The metal is set for a seventh weekly gain as labor issues in the past year hurt output in South Africa, the biggest producer. Impala Platinum Holdings Ltd., the second-largest producer, and the Association of Mineworkers and Construction Union started wage talks on Aug. 19.

Silver traded at $23.1585 an ounce from $23.125 yesterday, when prices rallied 1.1 percent. Palladium was little changed at $755.30 an ounce, set to snap three weeks of gains.

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