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Gold Advances on Haven Demand, Set for Best Quarter in a Year

\By Glenys Sim

March 31 (Bloomberg) -- Gold headed for its best quarter in a year on increased demand for the metal as a store of value and a hedge against accelerating prices, with central banks ramping up spending to fight the global recession.

Holdings in the SPDR Gold Trust, the biggest exchange- traded fund backed by the metal, stand at a record 1,127.44 metric tons, according to the company’s Web site. The volume has expanded 45 percent this year, overtaking the assets held by Switzerland to become the world’s sixth-largest stockpile.

“The ETF trend still lends a positive undertone to the gold market,” Darren Heathcote, head of trading at Investec Bank Ltd., said today from Sydney. “From a safe-haven stance, gold remains supported.”

Gold for immediate delivery rose as much as 0.6 percent to $921.09 an ounce, and was at $918.22 at 1:12 p.m. in Singapore. That’s a 4.1 percent gain this quarter, the largest advance since the three months ended March 31, 2008.

Central banks are lowering interest rates and spending trillions of dollars in response to the deepest economic slump since the Great Depression, increasing money supply and fueling concern about inflation ahead.

June-delivery gold on the Comex division of the New York Mercantile Exchange rose 0.3 percent at $920 an ounce. The metal, which tends to decline when the U.S. currency and equities gain, may “fluctuate depending on the moves in the equity markets and U.S. dollar,” according to Heathcote.

BlackRock Inc., manager of the world’s largest mining funds, said yesterday that investors should buy gold-mining companies and gold exchange-traded funds as the dollar may weaken. The U.S. currency’s strength “is overdone,” according to Evy Hambro, managing director of BlackRock’s $5.2 billion World Mining Fund.

Monthly Drop

Still, bullion is on pace for its first monthly decline in five months, down 2.6 percent, as higher prices deter jewelry buyers, and as equities surged after the U.S. outlined plans to rid banks of toxic assets. The Standard & Poor’s 500 Index has climbed 7.1 percent and the Dow Jones Industrial Averageadvanced 6.5 percent in the same period.

“We’re coming to the tail end of the wedding season particularly in India, and we’re seeing no demand,” Jonathan Barratt, managing director of Commodity Broking Services in Sydney, said today in a Bloomberg Television interview. “That’s a bit of a concern because we’re trying to work out what’s actually going to hold the gold prices up.”

India is the world’s largest gold buyer. Imports of the precious metal this month have been “zero so far” compared with 21 tons bought from overseas in the same month a year earlier, the Bombay Bullion Association Ltd. said March 18.

Among other precious metals for immediate delivery, silver gained 0.6 percent to $13.115 an ounce, platinum added 0.9 percent to $1,128 an ounce, and palladium lost 1.2 percent to $213.75 an ounce as of 1:14 p.m. in Singapore.