Gold Trades Little Changed in Asia as Investment Demand Fades

By Glenys Sim

May 7 (Bloomberg) -- Gold traded little changed in Asia as investment demand faltered after gains in equities dimmed demand for the precious metal as an alternative investment.

Holdings in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, decreased 0.36 metric tons to 1,104.09 tons as of May 6, the first decline since April 23, according to figures on the company’s Web site. Asian stocks advanced after U.S. Treasury Secretary Timothy Geithner said results of bank stress tests will reassure investors.

“For the rest of the week, gold will be subject to two factors: the results of the banking stress tests and Friday’s U.S. employment release for April,” James Steel, analyst at HSBC Securities, wrote in an e-mailed note.

Gold for immediate delivery rose 0.1 percent to $911.79 an ounce at 9:51 a.m. Singapore time, up 2.9 percent for the week.

Asian stocks also jumped after a report showed American companies eliminated fewer-than-estimated jobs in April. Geithner said in an interview to air in full on PBS that none of the 19 banks that underwent government stress tests are insolvent. U.S. stocks advanced to a four-month high yesterday.

ADP Employer Services said yesterday companies eliminated 491,000 jobs in April, 154,000 fewer than the average economist estimate in a Bloomberg survey.

Unemployment in the U.S. probably climbed in April to a 25- year high, showing the labor market will be one of the last areas to emerge from the worst recession in at least 50 years, economists said before a payrolls report tomorrow.

“The gold market may react negatively if the stress tests are better than expected,” said Steel. “If the unemployment numbers are worse than expected, then gold may rally.”

Among other precious metals for immediate delivery, silver gained 0.1 percent to $13.7475 an ounce, platinum rose 0.9 percent to $1,149.25 an ounce, and palladium added 0.3 percent to $229.75 an ounce.

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