June 08, 2016

Gold Climbs as Investors Weigh Fed Rates, Pause in China Buying

 (Bloomberg) - Goldincreased 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 dollar to a one-month low.
Bullion for immediate delivery climbed as much as 0.4 percent to $1,248.31 an ounce and traded at $1,247.86 at 10:52 a.m. in Singapore, according to Bloomberg generic pricing. The metal has moved less than $4 from the close on Friday when prices surged 2.7 percent after a report that the U.S. 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 percent at the end of last month, with the probability of a move in July and September coming in at 18 percent and 39 percent, futures contracts indicate. The People’s Bank of China leftgold reserves at the same level as in April, prompting concern that physical demand may be weakening. A gauge of the 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, 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 U.S. monetary policy to Spanish and U.S. elections, according to Clive Burstow, who helps manage $35 billion at Baring Asset Management Ltd. in London.
* Holdings in gold-backed exchange-traded funds added 1.85 metric tons to 1,860 tons as of Monday, the highest level since November 2013, data compiled by Bloomberg show. The assets rose for a fifth straight day.
* In China, bullion of 99.99 percent purity climbed 0.4 percent to 263.95 yuan a gram ($1,249.93 an ounce) on the Shanghai Gold Exchange.
* Silver rose 0.5 percent, palladium advanced 1 percent and platinum gained 0.5 percent.