Gold climbs as investors weigh Fed rates, pause in China buying

[SINGAPORE] Gold increased as investors weighed China's move to pause gold purchases for the first time in 11 months against diminishing odds for a Federal Reserve interest-rate increase this year, which helped push the US dollar to a one-month low.

Bullion for immediate delivery climbed as much as 0.4 per cent to US$1,248.31 an ounce and traded at US$1,247.86 at 10:52 am in Singapore, according to Bloomberg generic pricing.

The metal has moved less than US$4 from the close on Friday when prices surged 2.7 per cent after a report that the US created the fewest jobs in almost six years, reducing expectations for a rise in borrowing costs.

Traders now see no chance of a rate hike at the Fed's June 14-15 meeting, down from odds of 24 per cent at the end of last month, with the probability of a move in July and September coming in at 18 per cent and 39 per cent, futures contracts indicate.

The People's Bank of China left gold reserves at the same level as in April, prompting concern that physical demand may be weakening. A gauge of the US dollar fell to the lowest level since May 6.

"Until the Fed makes a decision next week, we don't expect much movement in gold," Brian Lan, managing director of Singapore-based GoldSilver Central Pte, said by e-mail.

Investors will continue to monitor China's gold reserves to see if the break from buying was a one-off occurrence, but the pause may provide a signal that physical demand is slowing, Mr Lan said.

Gold probably has bottomed and will be supported by the abundance of risk in the coming months from a potential British exit from the European Union and US monetary policy to Spanish and US elections, according to Clive Burstow, who helps manage US$35 billion at Baring Asset Management Ltd in London.

BLOOMBERG