Gold Has Biggest Weekly Rally in Four Months on Inflation Signs

Jun 20, 2014 3:44 pm ET

June 20 (Bloomberg) -- Gold and silver futures rose, capping the biggest weekly rallies in four months, as the outlook from the Federal Reserve for low U.S. interest rates boosted demand for the metals as hedges against inflation.

Policy makers led by Fed Chair Janet Yellen said June 18 that the central bank plans to keep borrowing costs low for a considerable time. The statement came after the close of regular gold trading, and the metal jumped 3.3 percent in the next session, the most in nine months.

Gold has climbed 9.5 percent this year, partly on speculation that a stalling U.S. economic recovery would leave the door open for continued Fed stimulus. The metal also advanced amid escalating tension between Russia and Ukraine and violence in Iraq.

“There’s still conviction out there to be long the market,” Adam Klopfenstein, a senior market strategist at Archer Financial Services in Chicago, said in a telephone interview. “The major reason was the Fed, and the other one was the increase of Russian troops again in the Ukrainian border.”

Gold futures for August delivery rose 0.2 percent to settle at $1,316.60 an ounce at 1:39 p.m. on the Comex in New York. The price reached $1,322.50, extending a rally to the highest for a most-active contract since April 15. The week, the metal climbed 3.3 percent, the most since Feb. 14.

Earlier today, futures fell as much as 0.5 percent as some traders locked in gains from yesterday’s rally, Klopfenstein said.

Shorts Squeezed

“Clearly after a move like this, you will see some consolidation,” Jeremy Baker, a senior commodity strategist who helps oversee about $600 million at Harcourt Investment Consulting AG in Zurich, said in a telephone interview. “What we really need to watch is what kind of squeezing is going on in the market and how many shorts have covered.”

Silver futures for July delivery rose 1.5 percent to $20.949 an ounce. Earlier, the price reached $20.99, the highest since March 18. Trading jumped 93 percent compared with the 100- day average for this time, according to data compiled by Bloomberg. This week, the metal gained 6.6 percent, the most since Feb. 14.

On the New York Mercantile Exchange, platinum futures for July delivery dropped 1.2 percent to $1,457.30 an ounce. This week, the price rose 1.6 percent, the most in a month.

Palladium futures for September delivery declined 2 percent to $822.20 an ounce, the biggest drop since June 12.

In South Africa, the world’s largest platinum producers are seeking more meetings with the biggest union at their mines to discuss a compromise on new pay demands that have delayed the resolution of a 21-week strike.