March
1 (Bloomberg) -- Gold rebounded from the biggest drop since 2008 as
investors bought the metal after it tumbled to the lowest level in more
than a month and exchange-traded product holdings advanced to a record.
Silver and platinum climbed.
Spot gold rose as much as 1.7 percent to $1,725.27 an
ounce, and was at $1,722.82 at 1:12 p.m. in Singapore. The metal lost
4.9 percent yesterday in the biggest one-day slump since Dec. 1, 2008
after the Federal Reserve gave no signal it favored a third round
quantitative easing, or QE3, to stimulate the economy.
Chairman Ben S. Bernanke's remarks boosted the dollar
as much as 0.8 percent against a basket of currencies, cutting gold's
appeal. The European Central Bank yesterday awarded 529.5 billion euros
($707 billion) in a second offering of three-year loans to 800 banks
under the Long-Term Refinancing Operation.
"It wasn't just Bernanke not saying anything about
QE3, it was the Europeans saying the LTRO is the last one," said Peter
Hickson, Hong Kong-based head of commodities research at UBS AG. "This
is a pretty changed outlook because we've been living on the hype of
liquidity, and how it's going to move markets."
While immediate-delivery gold plunged below $1,700
yesterday for the first time since Jan. 25, holdings in ETPs climbed to a
record 2,403.242 metric tons, according to data tracked by Bloomberg.
Spot gold had rallied 11 percent in January and 2.7 percent last month
to the close on Feb. 28.
'Put Pressure'
"January was strong and we needed to come into some
sort of correction," said Hickson. "We could go into a phase where it's
going to be subdued for a while, where the U.S. dollar's going up and
that's probably going to put pressure on commodities."
The metal is still 10 percent higher in 2012,
extending an 11-year rally boosted by Europe's sovereign-debt crisis,
central-bank demand and concern that inflation may accelerate.
April-delivery gold, which lost as much as $100 an ounce yesterday,
gained 0.8 percent to $1,724.80 on the Comex in New York. The Dollar
Index dropped 0.2 percent today.
Morgan Stanley maintained a forecast for gold to
average $1,845 this year, according to Peter Richardson, managing
director of research. "With bank-funding stress in Europe a less potent
negative factor than in the fourth quarter of 2011, we do not expect a
more aggressive retracement," he wrote.
'Wave of Selling'
Bernanke's comments "helped to trigger a wave of
selling," said Zhang Qian, an analyst at Haitong Futures Co., China's
largest brokerage by registered capital. "With the rest of the world
still on the path of monetary easing, we continue to expect gold to
track upwards this year."
Spot silver, this year's best-performing precious
metal, rose as much as 1.4 percent to $35.1775 an ounce, before trading
at $35.1475. It tumbled 6 percent yesterday, the most since Dec. 14,
paring gains last month to 4.5 percent. Holdings in exchange-traded
products expanded for a fourth day to 17,733.96 tons yesterday, the
highest level since May 4.
Cash platinum climbed 1.3 percent to $1,702.38 an
ounce after dropping 2.2 percent yesterday. One ounce of platinum bought
as much as 0.9924 ounce of gold yesterday, the most since Sept. 22,
according to data compiled by Bloomberg.
Palladium advanced 0.8 percent to $707.38 an ounce, after yesterday's 2.8 percent decline.
--Editors: Jake Lloyd-Smith, Ovais Subhani
To contact the reporter on this story: Glenys Sim in Singapore at gsim4@bloomberg.net
To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net
