Barefoot Investor: Gold Gains for Second Day as Equities Drop

Gold gained for a second day in London as concern about slowing growth drove equities lower and boosted demand for the metal as an alternative investment.

European equities fell before a report that may show the U.S. economy, the world’s largest, added fewer jobs last month as the jobless rate held above 9 percent. Advanced economies will probably return to recession as governments toughen austerity measures, said Nouriel Roubini, who predicted a bubble in U.S. house prices before the market peaked in 2006.

“Bullion is still well supported, as investors are afraid to liquidate their longs amid ongoing policy uncertainty in both the U.S. and Europe,” Andrey Kryuchenkov, an analyst at VTB Capital in London, wrote today in a report. “All eyes are on the jobs report in the U.S. today.”

Immediate-delivery gold gained $21.83, or 1.2 percent, to $1,847.97 an ounce by 9:37 a.m. in London. The metal reached a record $1,913.50 on Aug. 23 and is up 1.1 percent this week. Gold for December delivery was 1.2 percent higher at $1,850.30 on the Comex in New York.

Bullion is in the 11th year of a bull market, the longest winning streak since at least 1920 in London, as investors seek to diversify away from equities and some currencies. The metal is up 30 percent this year, outperforming global stocks, commodities and Treasuries.
‘Double-Dip’ Risk

“I don’t see a global recession in the sense that emerging markets will still grow robustly,” Roubini, chairman of Roubini Global Economics LLC, told Bloomberg Television today in an interview from Cernobbio, Italy. “Certainly there’s a risk of a double-dip recession in most advanced economies. One of the differences compared to the past is that we’re running out of policy bullets.”

A report due at 8:30 a.m. in Washington will show U.S. payrolls rose by 68,000 in August, down from a 117,000 increase in July, according to economist estimates. The Labor Department release may also show the unemployment rate remained unchanged at 9.1 percent.

“Employment is going to be a key issue for the U.S. for some time,” Zhang Jingjing, an analyst at Nanhua Futures Co., said by phone from Beijing today. “And until there’s some improvement in the job market, QE3 remains a real possibility and continues to be supportive of gold,” she said, referring to so-called quantitative easing.
ETP Holdings

Exchange-traded-product holdings were at 2,144.1 metric tons yesterday, little changed since Aug. 29, data compiled by Bloomberg show. Assets reached a record 2,216.8 tons on Aug. 8.

Silver for immediate delivery rose 1.5 percent to $42.21 an ounce. Platinum was up 0.5 percent at $1,859 an ounce. Palladium was little changed at $784.50 an ounce.

HSBC Securities USA Inc. raised its 2012 and 2013 price forecasts for platinum and palladium as increased automotive and industrial demand is expected to outpace mine supply. Platinum will average $1,875 next year, up from a previous outlook of $1,750, and palladium will average $810, up from $750, New York- based analyst James Steel wrote in a report yesterday. He cut estimates for 2011 because of lower auto demand resulting from Japan’s earthquake and tsunami in March. (Bloomberg)


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