Gold climbs in New York as drop to 4-month low may lure buyers

Yellow metal is set for first annual drop in 13 years

Gold gained in New York on speculation prices that fell to a more than four-month low on the outlook for less U.S. stimulus will spur physical purchases.

Bullion reached $1,226.40 an ounce on Nov. 25, the lowest since July 8. China’s net imports of gold from Hong Kong in October reached the second-highest level on record, Bloomberg calculations based on government data show.

Gold is set for the first annual drop in 13 years as some investors lost faith in the metal as a store of value and on speculation a strengthening economy will spur the Federal Reserve to slow its $85 billion of monthly debt purchases. A report yesterday showed U.S. building permits increased in October and economists expect American data today to show consumer confidence rose, while durable-goods orders declined.

“Prices have come under pressure amid growing speculation that U.S. Fed will taper its monthly asset purchases in coming months,” Mumbai-based Kotak Commodity Services Ltd. said today in a report. “The downside may however be capped amid dip buying after the recent sharp decline in prices.”

Bullion for February delivery gained 0.7 percent to $1,250.60 by 7:42 a.m. on the Comex in New York. Futures trading volume was 62 percent above the average for the past 100 days for this time of day, data compiled by Bloomberg showed. Gold for immediate delivery rose 0.7 percent to $1,251.19 in London.

Gold’s 14-day relative-strength index fell to about 30 last week, a level that suggests to some analysts using technical charts that the price may be set to rebound. The gauge was at 34.9 today.

U.S. Data

“Gold weakened as investors weighed the likelihood that the data would encourage the Fed to taper,” James Steel, an analyst at HSBC Securities (USA) Inc., wrote in a note. “Lower gold prices should stimulate physical demand, but gold is vulnerable to further erosion in investor confidence near term.”

Bullion’s drop this year increased physical demand, particularly in Asia. China’s net gold imports from Hong Kong were 129.9 metric tons last month, according to calculations by Bloomberg based on data from the Hong Kong Census and Statistics Department. Imports were a record 130 tons in March.

Silver futures for December delivery rose 0.6 percent to $20.01 an ounce on the Comex. Silver exchange-traded product holdings dropped 32.2 tons to 19,762.4 tons yesterday, the least since Aug. 13, data compiled by Bloomberg show.

Palladium futures for December delivery gained 0.9 percent to $724.95 an ounce on the New York Mercantile Exchange. Platinum for January delivery climbed 0.6 percent to $1,379.40 an ounce. It dropped to a six-week low of $1,368.50 yesterday.

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