Gold Gains as Investor Demand Increases ETP to Record

October 12, 2012 at 07:52

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Gold advanced for a second day, paring this week’s losses, as holdings in bullion-backed exchange traded products climbed to a record on speculation that central banks may implement more stimulus to spur growth.

Holdings in exchange-traded products rose for an 11th straight day, reaching an all-time high of 2,582.98 metric tons yesterday, according to data.

Gold jumped 11 percent in the third quarter, the most since June 2010, as the U.S. Federal Reserve announced a third round of quantitative easing, or QE. The European Central Bank held interest rates at a record low last week after agreeing on an unlimited bond-purchase program in September when the Bank of Japan added 10 trillion yen ($127 billion) to an asset-purchase fund. Brazill and South Korea cut benchmark rates yesterday.

“Gold is supported by the U.S. quantitative easing program and other countries’ stimulus measures,” said Janu Chan, an economist at St. George Bank Ltd. in Sydney. “The U.S economy is doing relatively better than the euro zone. That will drive the dollar higher and limit further gains in gold prices.”

U.S. jobless claims fell 30,000 to 339,000 in the week ended Oct. 6, the fewest since February 2008, government data showed yesterday. The Dollar Index, a gauge against the currencies of six major U.S. trading partners, was little changed after climbing to a one-month high reached yesterday.

Gold rose 70 percent as the Fed bought $2.3 trillion of debt in two rounds of QE from December 2008 through June 2011.

In China, spot gold of 99.99 percent purity gained as much as 0.7 percent to 359.99 yuan a gram ($1,786 an ounce) on the Shanghai Gold Exchange and was at 357.70 yuan. Volumes for the benchmark contract on the country’s largest cash bullion market were 3,929 kilograms yesterday from 3,121 kilograms on Oct. 10.