By Glenys Sim
Jan. 16 (Bloomberg) -- Gold rose a second day in Asia after measures by the U.S. government to stabilize its financial system boosted investor confidence and on speculation global interest rates will remain low. Platinum also climbed.
Gold advanced with equities after the U.S. Senate voted to release the second half of a $700 billion financial rescue package to U.S. President-elect Barack Obama and the European Central Bank cut its benchmark interest rate yesterday. Still, bullion is headed for a second weekly decline as the euro is set to weaken against the dollar for a third week.
Low real interest rates are “the most bullish environment for gold, as history would suggest this environment helped drive previous gold rallies,” Goldman Sachs Group Inc. analysts led by Larry Cho said in a note today. “Potential renewed U.S. dollar weakness will be the key driver of the price of gold in 2009.”
Bullion for immediate delivery gained as much as 0.5 percent to $822.05 an ounce, and traded at $821.03 at 11:20 a.m. in Singapore. Gold for February delivery was up 1.7 percent at $820.80 in electronic trading on the Comex division of the New York Mercantile Exchange.
“Today’s global monetary easing policy will help sustain the current low real interest rate environment, which is likely to provide a further boost to gold prices,” Goldman’s Cho said.
Policy makers from the U.S. to China have reduced borrowing costs aggressively in recent months to stimulate growth as the global recession worsens. The ECB lowered its benchmark rate from 2.5 percent to 2 percent yesterday, matching a record low, and investors speculated there may be further cuts ahead as the economic slump deepens.
The euro last traded at $1.3216 from $1.3115 yesterday.
Investment Demand
With expectations for “negative growth” throughout the developed world in 2009, gold’s “unique counter-cyclical appeal” will further support prices, said Cho.
Gold in the SPDR Gold Trust, the largest exchange-traded fund backed by bullion, expanded by 0.4 percent to a record yesterday.
The amount of gold now stands at 790.66 metric tons, according to figures posted on the company’s Web site, compared with 787.60 tons previously. The fund has overtaken Japan as the world’s seventh-largest gold holding.
Asian stocks rose, also paring a weekly loss, as an Intel Corp. report raised optimism chipmaker earnings may rebound and the weaker yen boosted profit prospects for Japanese exporters. The MSCI Asia Pacific Index gained 1 percent to 843.92 as of 12:30 a.m. in Tokyo. The gauge slumped 4.4 percent yesterday, its biggest drop since Dec. 2 and the lowest value since Dec. 8.
Among other precious metals for immediate delivery, silver rose 0.8 percent to $10.69 an ounce, platinum added 1.6 percent to $939.50 an ounce, and palladium was 1.1 percent higher at $181.50 an ounce at 11:20 a.m. in Singapore.
To contact the reporter on this story: Glenys Sim in Singapore at gsim4@bloomberg.net
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