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Singapore - Gold advanced to the highest level since July on signs that China’s lingering deflation risks offer room for more easing, adding to the case for the US Federal Reserve to hold off raising interest rates this year.
Bullion for immediate delivery climbed as much as 0.5% to $1 174.81 an ounce, the highest level since July 6, and was at $1 172.85 at 09:02, according to Bloomberg generic pricing. Prices are rising for the fourth straight day, set for the longest streak since August 21.
China’s consumer inflation moderated and factory gate deflation extended a record stretch of declines, signaling the People’s Bank of China still has room to ease monetary policy to support a slowing economy.
Bullion prices have rebounded from a five-year low in July as investors see less chance of higher US borrowing costs this year. A rate increase damps the appeal of gold as it doesn’t pay interest.
‘Positive for gold’
“That’s bullish to a certain extent because it provides a level of optimism over continued loosening of monetary policy,” Jonathan Barratt, chief investment officer at Ayers Alliance Securities in Sydney, said by phone, referring to the China CPI data.
“The rhetoric over gold, particularly out of the States, has been that no move on interest rates is positive for gold.”
Fed policy divisions were highlighted Tuesday as Governor Daniel Tarullo argued interest rates should stay on hold while documents showed most regional Fed directors sought higher borrowing costs. Yellen said on September 24 that she expected the first increase since 2006 to be warranted by year-end.
The odds of a rate liftoff in December are 36% while the chances for a move in March are 59%, futures data show.
Holdings in gold-backed exchange-traded products climbed for a third day as of Tuesday. Assets rose to 1 530.18 metric tons, near the highest level since the end of July, data compiled by Bloomberg show.
Bullion of 99.99% purity advanced 1.4% to 239.60 yuan a gram on the Shanghai Gold Exchange. Silver, platinum and palladium for immediate delivery increased, with palladium rising 1.7%.
