Gold prices top US$1,300 an ounce for first time in five months

[SINGAPORE] Gold exceeded US$1,300 an ounce for the first time since August on speculation slowing global growth will prompt central banks to boost stimulus, spurring haven demand.

Assets in exchange-traded products backed by the metal are heading for the first monthly gain since July. Open interest in New York futures and options is at the highest in eight weeks, and money managers have increased their net-bullish position to the largest since August.

After shunning gold for two years, investors are returning to the metal amid concern US growth won't be enough to offset weakness in foreign economies.

The International Monetary Fund and the World Bank cut outlooks for global growth this month, even as they upgraded estimates for American expansion.

Policy makers in Europe and Asia are being challenged to come up with new ways to spur growth amid prolonged below-target inflation.

"Capital is flowing into safe assets such as gold," said Mark To, head of research at Wing Fung Financial Group, a trader and refiner in Hong Kong.

"The market is currently full of news that's supportive of higher gold prices - expectations for lower global growth, uncertainty around what the ECB will do and more stimulus around the world," he said, referring to the European Central Bank by its initials.

Bullion for immediate delivery climbed as much as 0.6 per cent to US$1,303.63 an ounce and traded at US$1,300.58 by 3:20pm in Singapore, according to Bloomberg generic pricing.

Prices jumped 4.7 per cent last week, the most since 2013, as investors sought safety from turmoil in currency markets after the Swiss central bank unexpectedly abandoned the franc's cap against the euro. The metal climbed 9.8 per cent this year.

While diverging monetary policies have driven the Bloomberg Dollar Spot Index to a 10-year high, the slump in commodities and weakness in foreign economies have raised speculation the Federal Reserve may hold off boosting rates. This raises gold's appeal as a store of value as the metal generally gives investors returns only through price gains.

The ECB is expected to announce asset purchases on Jan 22, further weakening the common currency that's already near an 11-year low, while the Bank of Japan on Wednesday cut its inflation forecast and kept its unprecedented monetary easing unchanged. Gold rose to 1,126.61 euros an ounce, the highest since 2013.

Investors boosted assets in the SPDR Gold Trust, the biggest exchange-traded product backed by bullion, for a third day to 742.24 metric tons in the longest run since Dec 11. Assets were 704.83 tons on Jan 7, the lowest since 2008.

Goldman, SocGen Analysts are split on the 2015 outlook. Goldman Sachs Group Inc and Societe Generale SA expect the metal to decline, with SocGen forecasting prices to reach US$1,000 by Dec 31, it said in a Jan 14 report. Standard Chartered Plc expects the metal to rally to US$1,320 by the fourth quarter, it said Jan 20.

Gold fell 1.4 per cent last year after a 28 per cent loss in 2013, marking the first consecutive annual slide since 2000. A surge in equities and an improving US economy prompted some investors to lose faith in the metal. The Standard & Poor's 500 Index of shares is heading for a second monthly drop, the longest slump since 2012.

Silver climbed as much as 1.9 per cent to US$18.3327 an ounce, the highest since September, and traded at US$18.2528.

"It's too early to decide if gold is really out of the downtrend," said Lance Roberts, who helps oversee US$600 million as chief strategist for STA Wealth in Houston. "What has changed over the past few months is that fear is coming back. Some investors are buying gold to hedge against uncertainties."

BLOOMBERG