Aug 2, 2013

Gold Biggest Monthly Gain Since 2012

SINGAPORE — Gold rose on Wednesday, buoyed by month-end buying from funds as it headed for its biggest monthly gain since January 2012, and spurred by hope of a prolonged period of easy central bank money.

Bullion, up 8% in July, was also helped by some technical buying triggered after prices rose to $1,330 an ounce, breaking through the tight trading ranges of the past two sessions.

Traders were waiting for clarity from the US Federal Reserve on the timing of any pullback in the central bank’s $85bn monthly bond purchases.

"We see some speculative buying on gold and silver," said a Hong Kong-based precious metals trader. "Stops were triggered once gold hit $1,330."

"There is also month-end buying from funds as they window dress their portfolios."

Spot gold rose 0.4% to $1,331.60 an ounce by 7.03am GMT, staying in the vicinity of its five-week high of $1,347.69 touched last week. US gold gained about $7 to $1,331.40.

Silver also benefited from speculative buying, gaining close to 1%.

The July gain was prompted by the Fed’s assurance that it would only start phasing out monetary stimulus when it was sure the US economy was strong enough to stand on its own.

The Fed will release a statement on Wednesday afternoon after its two-day monthly policy meeting.

The bank is likely to decide to continue buying bonds, but could alter an accompanying statement to spell out the possibility of scaling back purchases later in 2013.

US gross domestic product (GDP) data and a private jobs report will also be released on Wednesday, which will help traders gauge the strength of the economy.

Spot gold was expected to rise to $1,361 an ounce, as it had completed a consolidation and resumed its uptrend, Reuters technicals analyst Wang Tao said.

Physical buying

Gold premiums in Shanghai have eased from last week, indicating a slowdown in demand. Shanghai gold was about $16 more than London spot prices, down from more than $25 last week.

Gold imports by India have halted since July 22, when the central bank announced new rules tying imports to exports, sending premiums for scarce stocks soaring.

Traders were quoting a premium of up to $45 an ounce over London spot prices.

Premiums in other parts of Asia were mostly stable, as dealers navigate a seasonally quiet period without any acute shortage of the metal.

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