Gold Rebounds from Four-Month Low


"Bets that low U.S. borrowing costs will bolster demand raises gold."

Gold futures rose from the lowest in almost four months on bets that low U.S. borrowing costs will bolster demand for the precious metal as an alternative investment.

This week, the Federal Reserve kept its benchmark interest rate close to zero% to bolster the economy. Before today, gold dropped 7.1% this month, partly as an equity rally eroded the appeal of the metal. In 2010, futures jumped 30%, the 10th straight annual gain.

"The correction is running its course," said Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago. "The Fed's continued stance on interest rates gave credence to the long side of the market."

Gold futures for April delivery rose $9.60, or 0.7%, to $1,329.40 an ounce at 11:25 a.m. on the Comex in New York. Earlier, the price touched $1,309.10, the lowest since Oct. 1. The metal reached a record $1,432.50 on Dec. 7.

Yesterday, holdings in exchange-traded products backed by bullion dropped to the lowest level since June, according to data compiled by Bloomberg from 10 providers.

Get Our Streetwise Reports Newsletter Free

A valid email address is required to subscribe