By Phoebe Sedgman
Gold headed for a second quarterly increase as investors weighed the outlook for the U.S. economy and low interest rates against signs of weaker physical demand. Silver extended a drop from the highest level since March.
Bullion for immediate delivery was at $1,316.59 an ounce at 12:45 p.m. in Singapore from $1,316.17 on June 27, according to Bloomberg generic pricing. Prices rose for a fourth week last week, the longest rally since March, and are 9.6 percent higher this year. Bullion last posted two quarterly gains in 2011.
Gold has rebounded from last year’s 28 percent slump as the dollar fell and the U.S. Federal Reserve renewed a pledge to keep interest rates low to bolster the recovery. Tensions in Iraq and Ukraine have spurred demand for a haven. Separate U.S. reports last week showed fewer applications for unemployment benefits and a pickup in inflation.
“Last week’s move in the gold price back above $1,300 an ounce looks based on the market’s reassessment of U.S. inflation risks higher, but we note that inflation expectations remain well-anchored,” Australia & New Zealand Banking Group Ltd. analysts including Victor Thianpiriya wrote in a note. “Physical market support remains lacking.”
Gold for August delivery declined 0.2 percent to $1,317.20 an ounce on the Comex in New York.
Inflation tracked by the U.S. central bank rose 1.8 percent in May from a year earlier, the biggest 12-month gain since October 2012, and just shy of policy makers’ 2 percent goal, data showed on June 26. Chair Janet Yellen has said that inflation persistently below target could pose risks to economic growth. The Fed has scaled back bond-buying this year even as growth faltered in the first quarter.
Holdings in the SPDR Gold Trust, the biggest bullion-backed exchange-traded product, stood unchanged at 785.02 tons on June 27, according to data compiled by Bloomberg. Assets are set to decrease this quarter and have dropped 1.7 percent this year.
Silver for immediate delivery fell 0.3 percent to $20.9062 an ounce. Prices that are set for a second quarterly advance in the longest such rally since 2011 rose to $21.2073 last week, the highest level since March 18.
Platinum climbed 0.3 percent to $1,481.25 an ounce to extend a second quarterly increase, the longest rally since 2010. Palladium rose 0.2 percent to $842.95 an ounce, also heading for a second quarterly gain.