Gold is starting to shed its reputation as a dead asset, and bulls can thank signs the U.S. economy is starting to sputter for the boost.
The metal for immediate delivery added 0.1 percent to $1,185.21 an ounce by 2:12 p.m. in Singapore after climbing above its 200-day moving average on Wednesday for the first time in about five months. Prices touched $1,189.91 on Wednesday, the highest since June 22.
A gauge of U.S. inflation fell by the most since January and retail sales missed forecasts, increasing traders’ bets the Federal Reserve will delay raising rates until next year. That’s good news for gold, which loses out when rates rise because the metal doesn’t pay yields, unlike competing assets.
“The last couple of the months we’ve seen a real sort of deterioration in U.S. data and a realization by the market that the Fed probably missed its window to hike in 2015,” Jordan Eliseo, chief economist at trader Australian Bullion Co. in Sydney, said by phone. “That’s obviously scared a few investors who were short gold out of their positions.” The market’s strength and better technical picture are also encouraging some investors to go long, he said.
The odds of a rate rise in December have dropped to 27 percent from 74 percent just two months ago, futures trading shows. Gold surged 70 percent from December 2008 through June 2011 as the U.S. central bank fanned inflation fears by purchasing debt and holding borrowing costs near zero percent in a bid to shore up growth.
“The fact that gold is above the 200-day average after five months, it’s a very strong signal that gold is on the uptrend for the time being,” Bob Takai, chief executive officer and president of Sumitomo Corp. Global Research, said from Tokyo. “The strength in the gold market is going to stay for a while.”
The weak dollar and physical demand from China and India are also supporting bullion, Takai said. The greenback is near its lowest in more than three months.
Silver added 0.3 percent, while platinum and palladium increased 0.5 percent.