Gold Heads for Biggest Monthly Gain Since Jan 2012

July 31, 2013 at 12:24

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Gold rose on Wednesday, buoyed by month-end buying from funds as it headed for its biggest monthly gain since January 2012, and spurred by hopes of a prolonged period of easy central bank money.

Bullion, up 8 percent in July, was also helped by some technical buying triggered after prices rose to $1,330 an ounce, breaking through the tight trading ranges of the last two sessions.

Traders were waiting for clarity from the U.S. Federal Reserve on the timing of any pullback in the central bank’s $85 billion monthly bond purchases.

“We see some speculative buying on gold and silver,” said a Hong Kong-based precious metals trader. “Stops were triggered once gold hit $1,330.”

“There is also month-end buying from funds as they window dress their portfolios.”

Silver also benefited from speculative buying, gaining close to 1 percent.The July gain was prompted by the Fed’s assurance that it would only start phasing out monetary stimulus when it was sure the U.S. economy was strong enough to stand on its own.

The Fed will release a statement Wednesday afternoon after its two-day monthly policy meeting.

The bank is likely to decide to continue buying bonds, but could alter an accompanying statement to spell out the possibility of scaling back purchases later this year.

U.S. GDP data and a private jobs report will also be released on Wednesday, which will help traders gauge the strength of the economy.

Spot gold is expected to rise to $1,361 per ounce, as it has completed a consolidation and resumed its uptrend, Reuters technicals analyst Wang Tao said.

Gold premiums in Shanghai have eased from last week, indicating a slowdown in demand. Shanghai gold was about $16 more than London spot prices, down from more than $25 last week.

Gold imports by India have halted since July 22, when the central bank announced new rules tying imports to exports, sending premiums for scarce stocks soaring.

Traders were quoting a premium of up to $45 an ounce over London spot prices.

Premiums in other parts of Asia were mostly stable, as dealers navigate a seasonally quiet period without any acute shortage of the metal.