Gold Climbs for Second Day as European Debt-Crisis Concern Stokes Demand

Gold rose for a second day in London as concern about Europe’s debt crisis and monetary policy in the U.S. spurred demand for the metal as a protection of wealth.

European leaders ruled out tapping the European Central Bank’s balance sheet to boost the region’s rescue fund and outlined plans to aid banks. Federal Reserve Vice Chairman Janet Yellen said on Oct. 21 that a third round of large-scale securities purchases may become warranted to boost the U.S. economy.

“Gold investor interest has stabilized and physical demand continues to emerge, albeit at softer levels,” Suki Cooper, an analyst at Barclays Capital in New York, wrote today in a report. “We continue to expect gold prices to be cushioned amid the seasonally strong period for demand, and this remains key before investment demand returns to the driver’s seat. We retain our positive view on gold given the macro backdrop.”

Immediate-delivery gold gained $10.82, or 0.7 percent, to $1,653.20 an ounce by 11:13 a.m. in London. Prices dropped 2.3 percent last week. Gold for December delivery was 1.1 percent higher at $1,654.50 on the Comex in New York.

The metal rose to $1,651 an ounce in the morning “fixing” in London, used by some mining companies to sell output, from $1,642.50 at the afternoon “fixing” on Oct. 21.

Bullion is in the 11th year of a bull market, the longest winning streak since at least 1920 in London. Prices reached a record $1,921.15 an ounce on Sept. 6 as investors sought to diversify away from equities and some currencies. The metal is up 16 percent this year.
Crisis Summit

Europe’s 13th crisis-management summit in 21 months also explored how to strengthen the International Monetary Fund’s role. The leaders excluded a forced restructuring of Greek debt, sticking with the tactic of enticing bondholders to accept losses to help restore the country’s finances. Another summit will be held in two days.

“The market is starting to say that talk’s no longer worth anything, we need to start seeing some real, underlying action,” said David Lennox, a resource analyst at Fat Prophets in Sydney. “While that’s not happening in actual, physical action, I think gold will continue to trade up.”

Gold imports by India, the world’s largest bullion consumer, may decline by as much as 30 percent this month as higher prices weaken demand, Prithviraj Kothari, president of the Bombay Bullion Association, said in a phone interview in Mumbai. Imports may be 70 metric tons to 80 tons in October, compared with 100 tons a year earlier, he said.

Silver for immediate delivery rose 0.6 percent to $31.575 an ounce. Palladium was up 2.1 percent at $627.88 an ounce. Platinum gained 1.4 percent to $1,534 an ounce.