Gold climbs for second day as investors boost holdings in funds

[SINGAPORE] Gold rose for a second day on signs that there's growing investor demand even as expectations for a US interest rate lifted the US dollar to the highest level since March. Platinum rebounded after entering a bear market on Wednesday.

Bullion for immediate delivery gained as much as 0.4 per cent to US$1,260.17 an ounce and traded at US$1,259.16 at 10:51am in Singapore, according to Bloomberg generic pricing. The price added 0.2 per cent on Wednesday.

While gold has seen some of this year's advance eroded by the prospects for higher borrowing costs in the US, investors in exchange-traded funds have yet to flinch by selling down their holdings.

As the Fed sends signals that US borrowing costs may be headed higher, with the latest clues in the minutes of its September meeting, assets in exchange-traded funds backed by gold rose to 2,048.3 metric tons, the highest since June 2013.

"A December rate hike has begun to look increasingly likely with yesterday's Fed minutes reinforcing that view," Bryan Lum, a Singapore-based strategist at Phillip Futures Pte Ltd, said in an e-mail.

"Gold prices, however, have managed to hold current levels despite the strengthening US dollar. The recent fall in prices is likely to attract bargain-hunting."

At the September gathering, the Federal Open Market Committee voted 7-3 to leave rates unchanged. Investors see a two-thirds chance of a rise in December, up from 17 per cent odds in November, when the Fed meets a week before the presidential election, fed funds futures show.

Platinum futures for January delivery added 0.8 per cent to US$949.20 an ounce on the New York Mercantile Exchange. On Wednesday, most-active prices closed more than 20 per cent down from the recent closing high in August.

BLOOMBERG