Gold climbs to highest level in more than six weeks on Fed view

[NEW YORK] Gold advanced for a fifth day to the highest level in more than six weeks on signs the Federal Reserve may delay an interest rate increase as inflation remains low and the selloff in emerging markets spreads.

Gold for immediate delivery climbed 1.4 per cent to US$1,168.39 an ounce, the highest level since July 7, before trading at US$1,163.36 by 12:22 pm in Singapore, according to Bloomberg generic pricing. The metal has surged 4.3 per cent this week and is set for the biggest such gain since January.

Fed officials showed concern over low inflation, according to the minutes of last month's meeting, signaling a possible rate increase in December instead of next month. China's decision to devalue amid slower growth and prospects for higher US interest rates have spurred selling across emerging markets and commodities. A gauge of Chinese manufacturing plunged to a six-year low on Friday.

"The current strength is a combination of the recent bearish data out of China, including the recent currency devaluation, heightening concerns of greater economic issues, and more immediately the fading chances of a Fed lift-off for September," said Mark Keenan, head of commodities research for Asia at Societe Generale SA in Singapore. "These pockets of strength provide a good selling opportunity," he said.

Gold is still 1.8 per cent lower this year. Prices dropped to US$1,077.40 in July, the lowest level in more than five years.

Haven Assets The preliminary Purchasing Managers' Index from Caixin Media and Markit Economics was at 47.1 for August, compared with a median estimate of 48.2. Numbers below 50 indicate contraction. The data add to concern that the slowdown in global growth is deepening, boosting the appeal of haven assets.

Traders see the likelihood of a US interest rate rise next month at 32 per cent, down from 48 per cent on Wednesday, data compiled by Bloomberg show. The prospect of higher rates makes gold unattractive because the metal doesn't pay interest.

Bullion of 99.99 per cent purity advanced as much as 3 per cent to 241.82 yuan a gram (S$1,655 an ounce) on the Shanghai Gold Exchange, up for a fifth day.

Gold futures for December delivery added 0.9 per cent to US$1,165.20 an ounce, set for a 4.6 per cent advance this week. Silver for immediate delivery climbed 0.4 per cent to US$15.6275 an ounce. Platinum rose 0.3 per cent to US$1,035.33 an ounce, set for a weekly advance of 4.3 per cent, the most in almost two years. Palladium was little changed at US$624.75 an ounce.

BLOOMBERG