Gold extended gains above $1,400 an ounce on signs that jewelers and other users of the metal are taking advantage of the biggest slump in prices in three decades. Silver headed for the worst week in almost 19 months. The premium for metal on the Shanghai Gold Exchange is as much as $10 an ounce, in Turkey it’s almost $20 and in Asia it’s about $5, Bernard Sin, head of currency and metal trading at bullion refiner MKS (Switzerland) SA in Geneva, said by e-mail. Last week, it was about $1 in Asia and Dubai, he said. “Physical demand is extraordinary,” Sin said today. Gold for immediate delivery rose as much as 2.6 percent to $1,426.05 an ounce and was up 1.6 percent by 11:53 a.m. in London. Prices are down 16 percent this year and dropped to $1,321.95 an ounce on April 16, the lowest since January 2011. Gold futures for June delivery climbed 1.4 percent to $1,412.40 an ounce on the Comex in New York.
Applying an annual growth in demand of 2.6% on top of the inflation rates to gold's price since 1989 yields an intrinsic value of $1,269, or 9% lower than its current close.
