Gold Futures Advance as Currency Turmoil Spurs Haven Demand

Jan 29, 2014 4:29 pm ET

Jan. 29 (Bloomberg) -- Gold futures rose for the first time in three sessions as a rout in emerging-market currencies spurred demand for the precious metal as a haven.

The South Africa Reserve Bank unexpectedly increased its benchmark interest rate today, following central banks in emerging markets from Turkey to Brazil that have tightened monetary policy to bolster their currencies. This week, a Bloomberg gauge tracking 20 emerging-market currencies fell to the lowest since April 2009.

“What we’re seeing is a bit of a safe-haven play” for gold, Bart Melek, an analyst at TD Securities in Toronto, said in a telephone interview. “We just had South Africa raise rates, and there continues to be quite a bit of worry about emerging markets. This whole proposition of global growth actually perking up is, to some degree, being put to question.”

On the Comex in New York, gold futures for April delivery traded at $1,267.60 an ounce at 4:24 p.m. in electronic trading after the Federal Reserve said it will trim its monthly bond buying by $10 billion to $65 billion.

In earlier floor trading, the price closed 0.9 percent higher at $1,262.20 an ounce, the biggest gain for a most-active contract since Jan. 23. The metal lost 1.1 percent the prior two sessions.

“The tapering has been priced in to an extent so we are not really seeing a knee-jerk reaction,” Scott Carter, the chief executive officer of Los Angeles-based Lear Capital, said in a telephone interview. “The safe-haven appeal because of the turmoil in some emerging markets is continuing to support gold.”

Bullion dropped 28 percent last year partly on concern that the central bank will reduce bond buying.

“Labor market indicators were mixed but on balance showed further improvement,” the Federal Open Market Committee said today in a statement. “The unemployment rate declined but remains elevated.”

Silver futures for March delivery rose 0.3 percent to $19.552 an ounce. In January, the metal has climbed 0.9 percent, heading the first gain in three months.

On the New York Mercantile Exchange, platinum futures for April declined 0.1 percent to $1,408.10 an ounce. The metal dropped for the fourth straight session, the longest slump in six weeks.

Palladium futures for March delivery fell 0.7 percent to $711.15 an ounce. The price declined for the fifth straight session, the longest slump in 11 weeks.

--With assistance from Claudia Carpenter in London and Rene Vollgraaff in Johannesburg. Editors: Joe Richter, Patrick McKiernan