Gold May Extend Gains on Renewed Investor Concern Over Economy

By Glenys Sim

April 8 (Bloomberg) -- Gold traded little changed in Asia after its biggest gain in almost three weeks as a decline in equity markets prompted some investors to shift money into precious metals to preserve wealth.

Bullion gained 1.4 percent yesterday, the most since March 19, as the recent steep rally in global equities stalled amid renewed concern the financial crisis has hurt companies’ profits. The benchmark MSCI Asia Pacific Index retreated for a second day today after investors from George Soros to Marc Faber predicted the rebound in equities will falter.

“We still see systemic risk in the financial system,” Walter de Wet, head of commodity research at Standard Bank Plc, wrote in a report. “While the stimulus packages announced last week should assist global growth, we doubt it can cure the problems entrenched in the financial system.”

Gold for immediate delivery was little changed at $881.43 an ounce at 9:44 a.m. Singapore time, after rising as much as 0.4 percent. The metal slid 6.3 percent in the three days to April 6, as global stocks rallied 3.8 percent.

June-delivery gold was little changed at $882.60 an ounce on the Comex division of the New York Mercantile Exchange, while gold for February delivery on the Tokyo Commodity Exchange rose 0.4 percent to 2,856 yen a gram ($885).

“We also expect physical demand for gold to rise at these price levels, which should support the gold price,” said de Wet.

Investment in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, was unchanged for a third day at 1,127.37 metric tons yesterday.

Gold Record

Gold could “easily” reach $1,000 an ounce as demand for a hedge against inflation outpaces an expanding scrap supply and weaker usage by jewelers, researcher GFMS Ltd. said.

Scrapping will gain this year after jumping 27 percent to a record 1,218 tons in 2008 as higher prices encouraged sales. Jewelry fabrication may extend last year’s decline, GFMS said in a report yesterday.

GFMS forecast in January that gold may climb to a record in the first half. The metal surpassed $1,000 on Feb. 20, an 11- month high, and has since dropped 13 percent. It reached a record $1,032.70 in March 2008.

Among other precious metals for immediate delivery, silver gained 0.5 percent to $12.33 an ounce, platinum lost 0.7 percent to $1,159.25 an ounce, and palladium was little changed at $225.25 an ounce at 9:44 a.m. in Singapore.

To contact the reporter on this story: Glenys Sim in Singapore at gsim4@bloomberg.net