Gold: Risk On and Risk Off !

http://bloom.bg/Wkeexi Gold Advances as Looming U.S. Spending Cuts Renew Haven Demand By Glenys Sim - Feb 28, 2013 6:40 PM ET Gold rebounded on concern that automatic U.S. spending cuts that are due to take effect from tomorrow may hurt the recovery of the largest economy, trimming the precious metal’s longest run of monthly losses since 1997. Spot gold rose as much as 0.4 percent to $1,603.11 an ounce, and traded at $1,601.72 at 3:24 p.m. in Singapore. The metal is still down 3.7 percent in February, poised for a fifth monthly decline, after investors cut exchange-traded products holdings by more than 100 metric tons on concern that a 12-year bull run is coming to an end. More than $85 billion of across-the-board U.S. cuts start tomorrow for the current fiscal year, followed by a March 27 expiration of a funding measure for U.S. agencies. Bullion is 1.3 percent higher this week after Federal Reserve Chairman Ben S. Bernanke defended the central bank’s asset purchases and political turmoil in Italy after an election spurred demand. “Gold is currently getting interest from both risk-on and risk-off investors,” said Xiang Nan, an analyst at CITICS Futures Co., a unit of China’s biggest listed brokerage. “The price below $1,600 is an attractive entry point for investors.” (I say, you've got to love that - who doesn't want to invest in something that is both Risk On AND risk off !!!!) Gold tumbled to $1,555.55 on Feb. 21, the lowest since July, as some U.S. central bankers sought more flexibility on stimulus. Assets in bullion-backed exchange-traded products, which slumped to a five-month low of 2,508.53 tons yesterday, are poised to drop 4 percent this month, the biggest fall since April 2008. In volume terms, global holdings have dropped by 103.7 tons this month, more than five times the net sales in January. Job Losses Bernanke said yesterday in testimony to U.S. lawmakers that the central bank may decide to hold bonds on its $3.1 trillion balance sheet to maturity as part of a review of its strategy for an exit from the record easing. The federal spending reductions due to start tomorrow could lower gross domestic product by 0.6 percentage point and cost 750,000 jobs by the end of 2013, according to the Congressional Budget Office. Gold for April delivery rose 0.3 percent to $1,601.20 an ounce on the Comex in New York. Gold rallied for 12 years through 2012 as investors sought a hedge against falling equities and potential inflation. The cycle for gold prices has probably turned as the U.S. recovery gathers momentum and holdings drop, Goldman Sachs Group Inc. said in a Feb. 25 report. Cash bullion of 99.99 percent purity on the Shanghai Gold Exchange lost 0.8 percent to 324.09 yuan a gram ($1,619.978 an ounce). Daily volumes for the benchmark cash contract have been more than double the average in 2012 since Feb. 18, when it reached a record 22,024 kilograms, according to exchange data. Cash silver gained 0.4 percent to $29.12 an ounce, paring a monthly decline, and spot platinum climbed 0.2 percent to $1,602 an ounce, also cutting a loss in February. Palladium added 0.6 percent to $747.45 an ounce, heading for a fourth monthly advance in the best run since January 2011.