Gold, Little Changed in London Trade, May Rise on Haven Demand

By Nicholas Larkin

Feb. 16 (Bloomberg) -- Gold, little changed in London, may rise as investors buy the metal as a store of value on concern the global economy will worsen.

The Group of Seven’s finance ministers said after talks in Rome yesterday that a “severe” economic downturn will persist for most of 2009, while Japan’s economy shrank at an annual 12.7 percent pace last quarter, the most since 1974. Lloyds Banking Group Plc fell in London, taking its decline over two days to 37 percent, on speculation the bank may need further capital to shore up its balance sheet.

“Gold’s ability to close last week above $930 was encouraging, and given the renewed banking and economic jitters this morning we expect gold to see further inflows,” James Moore, an analyst at TheBullionDesk.com in London, wrote today in a note.

Bullion for immediate delivery lost 48 cents to $941.22 an ounce at 9:11 a.m. local time. April futures declined 20 cents to $942 in electronic trading on the Comex division of the New York Mercantile Exchange. The U.S. market is closed today for a holiday.

Gold may gain for a second straight week as the banking crisis and recession deepen, according to twenty-six of 32 traders, investors and analysts surveyed from Tokyo to Chicago last week. Five survey respondents said to sell, and one was neutral.

Safe-haven investment has pushed assets in exchange-traded funds to all-time highs.

ETF, SPDR

Holdings in ETF Securities Ltd.’s Physical Gold fund rose to a record 2.299 million ounces on Feb. 13, according to the company’s Web site today. Assets in the SPDR Gold Trust, the biggest ETF backed by the metal, grew to a record 985.86 metric tons as of Feb. 13. Gold reached a six-month high of $952.92 an ounce in London the previous day.

Hedge-fund managers and other large speculators increased their net-long position by 5 percent in New York gold futures in the week ended Feb. 10, according to U.S. Commodity Futures Trading Commission data. Speculative long positions, or bets prices will rise, outnumbered short positions by 163,622 contracts on the Comex division of the New York Mercantile Exchange.

Among other metals for immediate delivery in London, silver fell 0.4 percent to $13.64 an ounce. Platinum slipped $1.75, or 0.2 percent, to $1,062.50 an ounce, and palladium was 0.7 percent lower at $215 an ounce.

To contact the reporter on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net