London - Gold traded near the highest in almost two months in New York as investors weighed more physical buying against prospects for less US stimulus.
Silver headed for the best week since 2011 after entering a bull market.
Bullion is set for the biggest weekly gain in five even as signs the US economy is improving fuelled speculation the Federal Reserve will start reducing stimulus.
Silver futures rallied more than 20 percent since June 27 through yesterday’s close, the common definition of a bull market.
Gold fell 19 percent this year as some investors lost faith in the metal as a store of value, wiping $56.2 billion from the value of bullion-backed exchange-traded products.
Filings showed this week billionaire John Paulson cut his stake in the SPDR Gold Trust, the biggest bullion ETP, by 53 percent in the second quarter.
The metal’s slump this year spurred purchases of jewellry and coins, particularly in Asia.
“The break above $1,350 prompted a short-covering rally, even though expectations are still for the Fed to scale back stimulus,” said Yang Xi, an analyst at Yongan Futures Co. in Hangzhou, China, referring to some investors closing bets on losses.
“Physical demand for gold rises and falls with the price. Silver seems better placed, as industrial demand should increase if the economy recovers.”
Gold for December delivery added 0.3 percent to $1,365 an ounce by 7:46 a.m. on the Comex in New York.
Prices reached $1,372.30, the highest since June 19, and are up 4 percent this week.
Futures trading volume was 9 percent below the average for the past 100 days for this time of day, according to data compiled by Bloomberg.
Gold for immediate delivery in London lost 0.1 percent to $1,364.71.
Gold ETP holdings fell 0.6 metric ton to 1,949.5 tons yesterday, data compiled by Bloomberg show.
Assets are up 1.2 tons so far this week, heading for the first weekly increase since February.
“Physical demand will start to slacken off up here, and once the fresh buying is sated, lethargy may well set in again,” David Govett, head of precious metals at Marex Spectron Group in London, said today in an e-mail.
“I would buy those dips, but don’t get carried away that this is the start of a major bull market.”
Silver for December delivery lost 0.3 percent to $22.905 an ounce in New York, after reaching $23.225 yesterday, the highest since May 22.
Prices are up 12 percent this week, the most since October 2011, cutting this year’s plunge to 24 percent.
Palladium for September delivery was little changed at $757 an ounce after climbing yesterday to a two-month high of $769.50.
Platinum for October delivery fell 0.6 percent to $1,523.60 an ounce.
It touched $1,536 yesterday, the highest since June 7. - Bloomberg News