Why gold extends longest rally …

Gold and silver extended their longest rallies since August while U.S. stocks closed higher following the biggest two-day gain since October. The yen strengthened and Chinese shares advanced.

Gold for April delivery climbed for a fourth straight day, adding 0.9 percent to $1,274.70 an ounce while silver for March delivery increased 0.9 percent for a sixth consecutive advance. TheStandard & Poor’s 500 Index (SPX) drifted between gains and losses for most of the day before closing 0.2 percent higher at 1,799.84. The Stoxx Europe 600 Index was little changed. The Shanghai Composite Index climbed to a one-month high. The yen gained versus 13 of 16 major peers. Brazil’s real and Hungary’s forint led emerging-market currencies lower against the dollar.

Federal Reserve Chairman Janet Yellen delivers her first semi-annual monetary-policy testimony tomorrow as markets weigh how mixed economic reports last week will affect the central bank’s plan for reducing stimulus. Stocks rose last week, trimming this year’s losses in global equities to $1.6 trillion.

“We would look for kind of a quiet day and perhaps the market setting up for tomorrow’s testimony,” Jim Russell, who helps oversee $113 billion as a senior equity strategist for U.S. Bank Wealth Management, said by phone. “There might be some residual concern around what Yellen might say. It will be interesting to watch what her response will be on what do you make of two weak payroll numbers in a row, and what do you make of the recent volatility in the emerging markets.”

China Gold

The rally in gold came as Chinese buyers returned from a holiday. Gold, which dropped by the most since 1981 last year, rebounded since the start of January as global equities declined and lower bullion prices spurred more physical demand. Volumes for the benchmark contract on the Shanghai Gold Exchange, which opened on Feb. 7 after a weeklong New Year holiday, climbed to the highest since May today.

Coffee and nickel added 0.4 percent and wheat climbed more than 1 percent, while heating oil and natural gas led the S&P GSCI Index of 24 commodities lower after it gained 2.6 percent the previous four days.

U.S. natural gas declined 4.1 percent for a fourth straight loss, with milder weather forecast by Commodity Weather Group LLC across the lower 48 states for Feb. 17 through Feb. 21.

The S&P 500 gained 0.8 percent last week after three straight weekly declines. The index is down 2.6 percent in 2014 amid concern about slower growth in China and reductions in Fed stimulus. The Fed has reduced its monthly buying of bonds to $65 billion from $85 billion. Three rounds of stimulus from the central bank have helped push the S&P 500 as much as 173 percent higher from a 12-year low in 2009 to its latest record on Jan. 15.

Market Movers

Among stocks moving today, Apple Inc. gained 1.8 percent as activist investor Carl Icahn backed away from his push to increase share repurchases at the iPhone maker. McDonald’s Corp. slid 1.1 percent as sales at its established U.S. stores fell for the third straight month. Yelp Inc. jumped 1.9 percent after a person familiar with the matter said Yahoo! Inc. will use the reviews provider to add context to its search results.

About 76 percent of companies in the index that have posted results this season have exceeded analysts’ estimates, data compiled by Bloomberg show.

U.S. stocks have too much momentum to make betting against the S&P 500 a winning strategy and the gauge will probably reach 1,900 next quarter, according to money manager Laszlo Birinyi.

‘Negative Reaction’

Birinyi, the founder of Birinyi Associates Inc. and one of the first analysts to advise clients to buy when stocks were bottoming after the 2008 financial crisis, said in a phone interview Feb. 7 that the benchmark gauge for U.S. equities will increase almost 6 percent by July. It fell 5.8 percent in the three weeks starting Jan. 15, losses he said signal healthy skepticism that set the stage for more gains.

“I don’t like when the market just shrugs these things off,” Birinyi said from Westport, Connecticut. “It’s OK to just stop and take a deep breath. The market should have some sort of a negative reaction when you have problems in Turkey and Argentina. That didn’t make me uncomfortable.”

Trading volumes in the Stoxx 600 were 21 percent less than the 30-day average, data compiled by Bloomberg show. The gauge advanced 0.8 percent last week, the first weekly gain in three.

Nokia Jumps

Nokia Oyj jumped 2.8 percent after agreeing with HTC Corp. to collaborate, giving each company access to the other’s patented technology. L’Oreal SA (OR) advanced 4.5 percent after people with knowledge of the matter said Nestle SA is exploring ways to reduce its $30 billion stake in the world’s largest cosmetics maker. The Swiss food company could sell shares to L’Oreal, the Bettencourt family or the public, or a combination of those three, the people said.

Securitas AB dropped 1.5 percent after the world’s second-biggest guarding-services company posted profit that missed analysts’ estimates. Centrica Plc lost 1.7 percent after U.K. Energy Secretary Ed Davey asked regulators to look at whether the supplier’s British Gas arm is too profitable and should be broken up.

Shanghai’s benchmark index jumped 2 percent. Chinese spending during a seven-day Lunar New Year break signaled strong consumption and that economic growth will be “relatively stable,” according to Bank of America Corp.

Turkey’s equity gauge fell 0.9 percent after S&P cut its credit outlook for the country, citing declining growth, erosion of institutional checks and balances and risk of an economic hard landing.

The real slid 0.9 percent against the dollar and the forint dropped 1.1 percent versus the euro.

Norway’s krone strengthened against all 16 major peers after data showed inflation in January exceeded analyst estimates. The currency appreciated for a fifth day, adding 0.7 percent to 6.13497 per dollar. Bloomberg

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