BLBG : Gold Gains as Biggest Drop This Month Boosts Investment Appeal
Aug. 18 (Bloomberg) -- Gold rebounded as the dollar declined and after the biggest drop this month boosted the metal’s appeal as an alternative investment.
Bullion, which typically moves inversely to the dollar, snapped a two-day decline as the Dollar Index, a gauge of the U.S. currency’s strength, slipped after two days of gains.
“Gold is slightly firmer as we’ve seen a very heavy sell- off in the last two sessions,” Hassall said. “It’s too early to say the downtrend in the dollar has been broken, so I think we should probably look for some support for gold around $930.”
Gold for immediate delivery rose 0.6 percent to $939.83 an ounce at 3:19 p.m. in Singapore. The metal yesterday fell as much as 1.9 percent, the steepest intraday decline since July 28.
Still, the metal may reverse direction if regional shares extend a decline, spurring haven demand for the dollar, said Toby Hassall, an analyst with CWA Global Markets Pty in Sydney.
The MSCI Asia Pacific Index of regional shares dropped 0.2 percent, extending yesterday’s 3.1 percent tumble. Equities worldwide slumped after foreign direct investment in China fell and Japan’s economy grew less than expected, igniting concern a rally in equities and commodity prices may not be justified by economic prospects.
Eugen Weinberg, a senior analyst with Commerzbank AG, said gold may decline as investors betting on price increases may liquidate positions and a slow economic recovery keeps inflation in check, diminishing demand for gold as a hedge.
Risk Factor
“The heightened optimism among speculative investors continues to represent a risk factor for gold, should these investors close their long positions,” Weinberg wrote in a report yesterday. “There is no need for gold as a hedge against inflation at the moment.”
Holdings in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, were unchanged for a fourth day at 1,065.49 metric tons yesterday, the lowest since March 13, according to the company’s Web site.
Among other precious metals for immediate delivery, silver added 1.4 percent to $14.195 an ounce, platinum jumped 1.3 percent to $1,237.50 an ounce and palladium rose 1.2 percent to $272 an ounce.
