VINACHEM

Gold rose after slumping to thelowest levels since September 2010 as investors weighed theprospect of increased purchases against reduced monetarystimulus by the U.S. Federal Reserve.

Cash bullion rose as much as 0.7 percent to $1,291.47 anounce and was at $1,285.93 at 10:38 a.m. in Singapore, afterfalling 1.1 percent yesterday. Gold’s 14-day relative strengthindex was at 29.5, below the level of 30 that indicates to someanalysts who study technical charts that a rebound may be near.Morgan Stanley lowered its price forecasts through 2018.

Gold tumbled to $1,269.46 last week, the cheapest sinceSept. 16, 2010, after Fed Chairman Ben S.Bernanke said that thecentral bank may slow its asset purchase program if the U.S economy continues to improve. The Fed currently buys $85 billionof Treasury and mortgage debt a month. Holdings in exchange-traded products declined to 2,094.647 tons yesterday, the leastsince June 2010, according to data compiled by Bloomberg.

“Although we expect a positive physical demand response toeventually cushion gold’s drop, we do not believe it will be ofthe scale or magnitude of the reaction in April,” James Steel,an analyst at HSBC Securities (USA) Inc., wrote in a note.“Price-sensitive buyers may wait for a well-defined bottombefore entering the market.”

Gold entered a bear market in April, unleashing apurchasing frenzy from China to India and the U.S. Prices havefallen 23 percent this year after rallying for 12 years asinvestors lost faith in the metal as a store of value. MorganStanley cut its 2013 target to $1,409 an ounce from $1,487,lowered its prediction for 2014 to $1,313 from $1,563, andtrimmed its 2015 estimate to $1,300 from $1,450.

Gold for August delivery rose as much as 0.9 percent to$1,287.90 an ounce on the Comex, before trading at $1,284.60.ETP assets are down 20 percent in 2013 after climbing every yearsince the first product was listed in 2003, with more than $55billion erased from the value of the funds, as “waning investorfaith has now turned more serious,” said Morgan Stanley.

Cash silver traded at $19.7055 an ounce from $19.6940yesterday, when it dropped 2.1 percent. Spot platinum gained 0.7percent to $1,343.65 an ounce, after tumbling to the lowestsince November 2009 yesterday. Palladium climbed 0.3 percent to$663.25 an ounce.