Gold Futures Recover From Biggest 3-Day Decline Since 1983; Silver Gains

By Glenys Sim - Sep 27, 2011 6:39 AM GMT+0700

Gold futures advanced for the first time in five days as the biggest three-day drop since 1983 encouraged purchases by investors seeking a store of value amid turmoil in global financial markets. Silver futures climbed for the first day in four, trading back above $30 an ounce.

December-delivery bullion rose as much as 2.4 percent to $1,633.30 an ounce in New York before trading at $1,630.50. Futures tumbled 11.8 percent in the previous three days, the largest such drop in 28 years. Immediate-delivery gold was little changed at $1,628.72 an ounce after slumping 9.8 percent in the last four days on optimism European officials will come up with a plan to stem the region’s debt crisis.

“The facts haven’t changed,” said Gijsbert Groenewegen, a partner at Silver Arrow Capital Management. “The only thing that changes over time is the perception that the Europeans are doing something about it, that they might come up with some solutions, but they’re not solving the problem. They’re just postponing what will happen in three months or six months or whatever but we will get default.”

The European Central Bank is likely to debate restarting covered-bond purchases and may discuss interest-rate cuts to ease funding strains, a euro-region central bank official said. Policy makers are under pressure to halt the 18-month European debt crisis that has Greece on the brink of default and threatens to tip the global economic back into recession.

“When the market gets very panicky they sell everything off and they go for cash and treasuries because that’s really the largest market where you can park your money,” Groenewegen said in a Bloomberg Television interview. “From a fundamental point of view, the dollar and treasuries are no better than the sovereign debt in Europe. It’s a great opportunity to accumulate more gold and silver.”

December-delivery silver gained as much as 2.8 percent to $30.81 an ounce after dropping to an 11-month low of $26.150 yesterday. Cash silver was little changed at $30.6775 an ounce.

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

To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net