Gold futures rebound from six-week low as drop below $1 300 seen spurring demand

Gold futures rebounded from a six-week low, trimming a second weekly loss as investors weighed speculation prices below $1 300 an ounce may spur demand against signs of recovery in the US, which may add to the case for Fed tapering. Meanwhile, assets in the SPDR Gold Trust, the biggest bullion-backed ETF, were unchanged yesterday.

On the Comex division of the New York Mercantile Exchange, gold futures for settlement in June rose by 0.35% to trade at $1 299.30 an ounce by 07:53 GMT. Prices shifted in a daily range between $1 299.40 an ounce and $1 292.60 an ounce. Yesterday, gold futures touched $1 289.70, the weakest level since February 13th. Prices are heading for a 2.8 percent drop this week.

Gold is 8.2% higher this quarter on concern that global growth was faltering and as turmoil over Ukraine left Russia and the West involved in their worst conflict since the end of the Cold War.

A price of “$1,300 an ounce is an important threshold for price-sensitive bullion buyers,” said James Steel, an analyst at HSBC Securities (USA) Inc.,cited by Bloomberg. “Gold’s decline below this level may encourage sidelined physical buyers back into the market. This may provide a cushion for gold.”

Fed stimulus outlook

The US economy expanded more rapidly in the final three months of 2013 than previously estimated as consumer spending jumped by the most in three years, while initial jobless claims unexpectedly declined last week, curbing demand for the precious metal as a store of value.

The US economy expanded at a 2.6% annualized rate in the final three months of 2013, slightly below analysts’ expectations of a 2.7% gain, but up from a preliminary estimate of 2.4%, a report by the the Bureau of Economic Analysis showed yesterday. The US gross domestic product grew 4.1% in the third quarter.

Data also showed that personal consumption expenditures rose 3.3% in the fourth quarter, the most since the final three months of 2010, exceeding analysts’ projections of a 2.8% increase and up from an initial estimate of 2.6%. Consumer spending is regarded a key economic indicator as it typically accounts for almost 70% of the US economic growth.

Strong consumer spending on services, especially in the health care sector, helped boost the expansion, a sign this year’s slowdown can be partly attributed to the inclement weather.

In addition, initial jobless claims in the US fell by 10 000 to 311 000 in the week ended March 22, the weakest level since early December, data by the US Department of Labor showed on Thursday. Analysts had expected the number of Americans who file for jobless benefits to reach 323 000 last week.

However, gold drew some support after the National Association of Realtors reported its index of pending home sales fell 0.8% last month, after a 0.2% drop in the previous month that was previously reported as a gain. The median forecast of experts called for a 0.2% increase.

“For housing, it’s been primarily an issue of bad weather,” Russell Price, senior economist at Ameriprise Financial Inc. in Detroit, said in a Bloomberg interview before the report.“Not a lot of buyers were enticed to go out and look, and not a lot of sellers put their best foot forward” in terms of staging the property or hosting an open house. “Conditions will improve as the weather improves,” he added.

Assets in the SPDR Gold Trust, the biggest bullion-backed ETP, were unchanged at 816.97 tons yesterday. Holdings in the fund are up 1% this year after it lost 41% of its assets in 2013 that wiped almost $42 billion in value. A total of 553 tons has been withdrawn last year.