Gold's on a roll with another 1% advance - Wealth Management

Another major firm -- Merrill Lynch -- calls a potential bottom and predicts fall rebound for bullion

Gold settled nearly 1 percent higher at $1,245 on Tuesday, as the dollar steadied below three-year highs and Chinese inflation data boosted the metal's appeal as a hedge against rising prices in the world's second-biggest buyer of the metal.

Spot gold rose to its highest since July 2 at $1,260 an ounce earlier, and recently was trading at $1,243 an ounce, up 0.6 percent. It was on track for the biggest gains in seven sessions.
Bloomberg reported: "China's consumer price index rose 2.7 percent from a year earlier, the National Bureau of Statistics said today, compared with a median estimate of 2.5 percent in a Bloomberg survey. Asian interest in gold has been supported by reports of strong physical buying in China, Standard Bank Plc said."

"Chinese inflation was a bit hotter than expected, so that's leading people to expect more demand for gold from China as an inflation hedge," 7:00's Report editor Tom Essaye told MarketWatch. Commerzbank analyst Carsten Fritsch added: "We are probably close to the bottom, but not there yet, given continued [exchange-traded product] outflows and rising real rates." 

Though Fritsch was reticent, count Mary Ann Bartels of Merrill Lynch as another analyst who is calling a bottom in gold. Shetold CNBC on Tuesday: "There is seasonality to gold, because you do have Indian wedding season in the fall. You have one in the spring and one in the fall, so that's when you typically get demand from India for gold. The two major buyers for gold are China and India, and we think that's long-term support. The other important buyer that we like to watch are the emerging-market central banks. So that's really where the long-term buying is taking place." Asked for her price targets, she said: "We do have a year-end target for gold this year at $1,478 and for 2014 at $1,560, so we're looking for a bottom around this $1,200 level -- could maybe as as test undershoot it. We'd be a buyer, looking for prices to rise later in the year and next year."

In contrast to China's hot inflation report, the IMF slashed the global outlook for growth, lowering its 2013 global GDP growth forecast to 3.1% from 3.3%, while its 2013 U.S. GDP growth estimates were revised down to 1.7% from 1.9%. The IMF expects euro area GDP to contract 0.6% in 2013, downgraded from the previous estimate of a 0.3% contraction.

So the overall global picture remains uncertain, and that's why Harvard University economist Kenneth Rogoff came out this week to argue that reports of the gold bull's death have been greatly exaggerated. "The case for or against gold has not changed all that much since 2010, when I last wrote about it. In October of that year, the price of gold -- the consummate faith-based speculative asset -- was on the way up, having just hit $1,300. But the real case for holding it, then as now, was never a speculative one. Rather, gold is a hedge. If you are a high-net-worth investor, or a sovereign wealth fund, it makes perfect sense to hold a small percentage of your assets in gold as a hedge against extreme events. ... The recent collapse of gold prices has not really changed the case for investing in it one way or the other. Yes, prices could easily fall below $1,000; but, then again, they might rise. Meanwhile, policymakers should be cautious in interpreting the plunge in gold prices as a vote of confidence in their performance."

More information can be found online at http://www.goldbullionadvisors.com