Bloomberg Gold May Climb as Investment Demand Increases, Money `Coming Into Metals'

Gold, trading little changed, may climb on increased demand for an alternative asset as central banks including the U.S. Federal Reserve maintain low interest rates to try to sustain the economic recovery.
Immediate-delivery bullion rose as much as 0.2 percent to $1,417.40 an ounce and was at $1,415.45 at 12:11 p.m. in Seoul. The February-delivery contract fell 0.5 percent to $1,415.70 an ounce on the Comex in New York after a record settlement yesterday of $1,422.90.

“The market looks very bullish this year,” Bruce Ikemizu, head of commodity trading at Standard Bank Plc in Tokyo, said today by phone. “Money is coming into metals, especially gold. As long as this liquidity situation continues, those commodities are pretty firm.”

The Federal Reserve has kept borrowing costs low and bought bonds to boost growth. Precious metals advanced last year as the European Union bailed out Greece and Ireland, with gold rallying 30 percent, the 10th straight annual gain. The immediate- delivery price reached a record $1,431.25 an ounce on Dec. 7.
Assets in exchange-traded products backed by gold gained 17 percent in 2010. Holdings rose 1.5 metric tons to 2,098.72 tons yesterday, according to data from 10 providers.

Hedge-fund managers and other large speculators increased their net-long position in New York futures by 9,364 contracts, or 5 percent, in the week ended Dec. 28 from a week earlier, according to U.S. Commodity Futures Trading Commission data.

‘Further Gains’
“Short-term technicals remain in favor of further gains across the sector,” Stefan Graber, a Singapore-based analyst with Credit Suisse Group AG, wrote in a report today. “Gold is aiming for the $1,425 resistance level, while a decisive break above $31 would open the way for silver prices to test $32.50.”
Silver for immediate delivery was little changed at $30.7350 an ounce after yesterday climbing to $31.2375, the highest level since March 1980. Last year, the metal surged 83 percent, the most since 1979.
The Dollar Index, which gauges the greenback’s value against six counterparts including the euro and the yen, was unchanged today after gaining 0.2 percent yesterday. Precious metals typically move inversely to the U.S. currency.

“Strong manufacturing data from the U.S. economy should bode well for the more cyclical platinum and palladium markets as industrial applications are their main source of demand,” Credit Suisse’s Graber wrote.
Manufacturing in the U.S. expanded at the fastest pace in seven months in December, data showed yesterday. The Institute for Supply Management said its factory index rose in December to 57, the highest level since May, from 56.6 in November. Readings greater than 50 signal growth.

Spot platinum was little changed at $1,766.38 an ounce, while palladium lost 0.4 percent to $791.25 an ounce.