Gold headed for the biggest weekly advance since October as U.S. economic data that trailed estimates increased haven demand, with holdings in the biggest exchange-traded product expanding to a two-month high. Silver was set for the longest rally since March 2008.

Bullion for immediate delivery rose as much as 0.6 percent to $1,310.70 an ounce, the highest price since Nov. 8, and traded at $1,309.18 at 3:21 p.m. in Singapore. Gold has traded above the 100-day moving average since Feb. 10, and is heading for a close above the 200-day moving average for the first time since February 2013. This week, bullion is up 3.4 percent.

While the prospect of a reduction in asset purchases by the Federal Reserve helped spur a 28 percent slump in gold in 2013, the cuts to stimulus that began in January hurt emerging-market stocks and currencies and increased gold’s appeal as a haven. Bullion advanced 8.6 percent this year on concern that U.S. growth may be stalling and as the MSCI All-Country World Index of equities retreated 1.5 percent.

“Gold got seriously hammered last year, and with the stock markets not performing as well as expected, some investors are reconsidering their allocation to gold,” Wallace Ng, a Shanghai-based trader at Gemsha Metals Co., said in an interview. “Physical demand this week has been good. But that’s not enough to sustain the price move, which tells me it’s mainly driven by sentiment and technicals.”

U.S. retail sales fell in January by the most since June 2012, while jobless claims unexpectedly climbed last week, data showed yesterday. Stimulus will be cut in measured steps, Fed Chair Janet Yellen said on Feb. 11, while reiterating that the purchases aren’t on a preset course.

SPDR Expands

Assets in the SPDR Gold Trust expanded 0.9 percent to 806.35 metric tons, the highest level since Dec. 20. The biggest ETP backed by bullion, which shrank 41 percent last year, is up 1.2 percent this week, headed for a third weekly advance.

Gold’s advance this year hasn’t deterred analysts at Goldman Sachs Group Inc., who this week restated a forecast for lower prices. The metal will drop to $1,050 by the end of the year, analysts led by Jeffrey Currie said in a report, citing expectations for improving U.S. growth.

Bullion’s 14-day relative strength index today topped the level of 70 that signals to analysts and investors who study charts that prices may be set to reverse. The RSI was last above 70 on Aug. 28, before prices fell 4.8 percent in September.

Newcrest’s View

Gold’s rally has been driven in part by “very, very strong” physical demand, Greg Robinson, chief executive officer of Newcrest Mining Ltd., Australia’s biggest producer, said today. His counterpart at largest gold miner Barrick Gold Corp., Jamie Sokalsky, is optimistic that prices have bottomed as reports of Chinese demand and slowing ETP sales are positive.

Volumes for Shanghai’s benchmark spot contract climbed for a second day today after reaching a nine-month high on Feb. 10. The nation’s bullion consumption jumped 41 percent in 2013 to a record 1,176.4 tons as demand for jewelry and bars rose, the China Gold Association said Feb. 10.

China probably overtook India as the largest consumer last year as import restrictions curbed demand in the South Asian nation. A lack of investment alternatives in China, and prices that are 32 percent below the record $1,921.15 in September 2011, spurred purchases in the second-largest economy, according to Liu Xu, a Beijing-based analyst at Capital Futures Co.

The jump in gold triggered gains in related equities. Zijin Mining Group Co., China’s biggest gold miner by market value, rose 1.7 percent to HK$1.84 in Hong Kong today, after tumbling 46 percent last year. OceanaGold Corp., Alacer Gold Corp. (AQG) and Beadell Resources Ltd. climbed in Sydney.

Futures Climb

Gold for April delivery added as much as 0.8 percent to $1,311 an ounce on the Comex, the highest price for a most-active contract since Nov. 8. An eighth day of gains today would be the longest rally since July 2011. The net-long position rose 74 percent this year to 59,408 futures and options in the week to Feb. 4, U.S. Commodity Futures Trading Commission data show.

Silver jumped as much as 1.9 percent to $20.8818 an ounce, the highest level since Nov. 14, and traded at $20.8203. Prices have risen for 11 days and are up 6.9 percent this year after tumbling 36 percent in 2013.

Platinum and palladium headed for their longest advances since July. Platinum added as much as 0.4 percent to $1,422.56 an ounce, the highest price since Jan. 28, and is up for a sixth day. Palladium rose as much as 0.5 percent to $736.75 an ounce, the highest level since Jan. 23, gaining for an eighth day.

(Source: Bloomberg)