Gold extends quarterly rise on physical buying

Production and Markets

Gold gained in Asia, extending its third quarterly increase, as jewellers and other physical buyers were attracted by the precious metal’s drop below US$940/oz.

The National Spot Exchange in India, the world’s largest consumer, on June 30 launched small-denomination contracts to lure households to trade physical gold. Turkey, the world’s third-largest manufacturer of gold jewellery in 2007, imported US$125 million worth of the metal in the past three weeks as the wedding season boosts demand, according to a report in Turkish newspaper Referans yesterday.

"We see a little bit of physical buying emerge whenever the market dips, but in the near term, gold will continue to trade in the US$920 to US$950 range," said Adrian Koh, an analyst at Phillip Futures in Singapore. "In the longer term, gold remains supported by inflation expectations."

Gold for immediate delivery rose as much as 0.4% to US$930.41/oz and traded at US$929.25 at 2:08pm in Singapore.

The metal dropped as much as 1.5% yesterday, and is up 5.3% this year.

Gold holdings in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, dropped 183,424oz to
39.5Moz yesterday, according to the company’s website.

Still, a rebound in the dollar may limit gold’s gains as the metal maintains its inverse relationship to the currency, said Koh. The dollar index, which tracks the dollar against six major currencies, gained for a second day after a report showed an unexpected drop in US consumer confidence for June, increasing demand for the world’s main reserve currency.

Among other precious metals for immediate delivery, silver climbed 0.2% to US$13.625/oz, platinum fell 0.4% to US$1,172.50/oz and palladium lost 0.6% to
US$249.25/oz as of 2:10pm in Singapore.

(Bloomberg, July 1)