Gold stages comeback, erases 2015 losses

Prices reach 3-month high on New York Comex

Go ahead, call it a comeback: gold just erased its 2015 losses.

The metal jumped to a three-month high on Thursday as evidence that economies are slackening from China to Europe damped expectations that the Federal Reserve will soon raise interest rates. Signs of stagnating US inflation and retail sales added to the case for policy makers to keep rates low, which revives the appeal of gold as a store of value.

Gold bulls are returning after ignoring the metal for much of the year. Holdings in exchange-traded products backed by bullion are heading for the fourth gain in five weeks, and options are signaling that traders expect the recent rally has more to go. Analysts surveyed by Bloomberg are still split on whether the metal will cap 2015 with an advance, after prices tumbled 29 per cent in the previous two years amid resilient US economic growth and a stronger dollar.

"The gold trade right now is really about the Fed," Bob Haberkorn, a senior strategist at RJO Futures in Chicago, said in a telephone interview. "With the numbers deteriorating as they are, it's getting less likely there will be a Fed rate increase this year. The fundamentals, along with the technicals, are all pointing to a bullish close for gold at the end of the year."

Gold futures for December delivery rose 0.7 per cent to settle at $1,187.50 an ounce at 1:43 pm on the Comex in New York. The metal has advanced for five straight sessions, and is up 0.3 per cent for the year. Prices touched $1,191.70 on Thursday, the highest since June 22.

Bullion fell for five straight quarters through September 30, the longest streak since 1997, as the US economic recovery gained momentum and the job market improved, fueling expectations that the Fed would stick with its guidance for higher rates. That picture has been muddled over the past month. Prices on Wednesday closed above the 200-day moving average for the first time since May.