Gold fluctuates as price fall spurs investor demand

LONDON: Gold fluctuated in London on Friday after a drop to the lowest level in almost four months spurred investors to buy the metal. Bullion is down 2.1% this week, set for a fourth weekly loss and the longest losing streak in almost a year. Prices have dropped as the MSCI World Index of shares on Thursday climbed to the highest level in more than two years and as exchangetraded product holdings fell to a seven-month low. The Federal Reserve this week said the US still needs stimulus to cut unemployment.

“The positive argument will rest on the possible capitulation sell-off” this week, Tom Pawlicki, an analyst at MF Global Holdings in Chicago, said on Friday in a report . “Such massive liquidations are typical of washouts and usually signal that a bottom is near.”

Immediate-delivery bullion added 20 cents to $1,314.13 an ounce at 11:14 am in London, after earlier falling to $1,308.25, the lowest level since October 1. Prices added as much as 0.3% and lost as much as 0.4% on Friday. The metal for April delivery was 0.4% lower at $1,314.90 on the Comex in New York. Bullion fell to $1,316 an ounce in the morning “fixing” in London, used by some mining companies to sell output, from $1,334.50 at Thursday’s afternoon fixing.

Gold jumped 30% last year after governments spent trillions of dollars and kept interest rates low to bolster economies. Europe’s sovereign-debt crisis also boosted the metal’s allure. The MSCI World Index gained after the Fed this week said it would continue to support the recovery even as growth accelerates. Gold reached a record $1,431.25 on December 7.

Higher equities are “reducing investor appetite for safehaven gold,” Mark Pervan, head of commodity research at Australia & New Zealand Banking Group, said in a report on Friday. Appetite for gold has “waned as other markets looked more attractive.” Gold held through ETPs fell for a fourth day to 2,037.48 tonne Thursday, data compiled by Bloomberg from 10 providers show.