Investors add most gold to funds in 5 months amid Greek impasse

[LONDON] Investors bought the most gold through physically-backed funds in almost five months as Greece and its creditors headed for last-ditch talks. Bullion prices were little change and palladium was near a two-year low.

Gold exchange-traded product holdings rose 6.9 metric tons, the most since Feb 2, to 1,598.7 tons, data compiled by Bloomberg as of Thursday show. Assets rose in seven of the past eight days, rebounding from the lowest level since 2009.

Euro-area leaders are convening in Brussels for a second day of talks Friday and German Chancellor Angela Merkel said a weekend meeting of finance ministers will be decisive for Greece, which faces a debt repayment next week. A separate European Union official said that without a deal by then, ministers would have to map out ways to manage the potential consequences of a Greek default.

Gold is being supported by "continued worries related to Greece and investors returning to ETFs," Ole Hansen, head of commodity strategy at Copenhagen-based Saxo Bank A/S, said in an e-mail.

"The Greek negotiations will go to the wire and optimism about a deal seems to be fading." Bullion for immediate delivery was little changed at US$1,173.66 an ounce by 10:48 am in London, according to Bloomberg generic pricing. Prices fell the previous five days in the longest slump since March and are down 2.2 per cent this week. Futures for August delivery added 0.1 per cent to US$1,172.80 on the Comex in New York.

On the Shanghai Gold Exchange, volume for benchmark spot contract was the highest on record, according to data on Bloomberg going back to 2002. Comex volume was about the 100-day average for the time of day.

Earlier Friday, gold prices had traded at the lowest in almost three weeks. The metal is down 0.7 per cent this year on expectations that the Federal Reserve will raise interest rates for the first time since 2006. Higher borrowing costs curb gold's allure because the metal doesn't pay interest or give returns like other assets such as bonds and equities.

Silver for immediate delivery was little changed at US$15.8575 an ounce, after earlier falling to the lowest since March. Platinum declined 0.4 per cent to US$1,080.69 an ounce and is set for a sixth weekly loss, the longest run since 2013.

Palladium lost 0.2 per cent to US$678.65 an ounce, after dropping to US$672.38 on Thursday, the lowest in almost two years. The metal, which entered a bear market this month, is headed for a seventh week of losses in the longest streak since 2008.

BLOOMBERG