BLBG : Gold Climbs for Second Day as Dollar Drops on Signs of Recovery
Aug. 19 (Bloomberg) -- Gold climbed for a second day as the dollar weakened on signs that the global recession is abating, reviving investors’ appetite for higher-yielding assets.
The Dollar Index, a gauge of the U.S. currency, declined for a second day, extending this year’s loss to 3 percent. Pacific Investment Management Co., which runs the world’s biggest bond fund, said in a report that the dollar will probably drop as it loses its status as a reserve currency.
“The weak trend of the dollar remains intact, helping to bolster prices of raw materials, including gold,” said Jeon Yeong Min, a trader with Hyundai Futures Co. in Seoul. “The dollar will remain a key force in setting the direction of gold for a while until physical demand revives later in the year.”
Gold for immediate delivery, which tends to move inversely to the dollar, rose as much as 0.4 percent to $942.40 an ounce, and traded at $941.40 an ounce at 8:41 a.m. in Singapore. The metal has gained 7 percent this year.
German investor confidence advanced to the highest level in more than three years, according to data released yesterday by the ZEW Center for European Economic Research, adding to signals the global recession is easing. European and U.S. stocks gained.
Pacific Investment Management, a unit of Munich-based insurer Allianz SE known as Pimco, said that investors should consider cutting holdings of the U.S. currency, according to a report from Curtis A. Mewbourne, a Pimco portfolio manager.
“While we have not yet reached the point where a new global reserve currency will arise, we are clearly seeing a loss of status for the U.S. dollar as a store of value even in the absence of a single viable alternative,” Mewbourne wrote.
Holdings in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, were unchanged at 1,065.49 metric tons as of Aug. 18, according to the company’s Web site.
Among other precious metals for immediate delivery, silver added 0.9 percent to $14.1225 an ounce, platinum was little changed at $1,232.50 an ounce and palladium fell 0.5 percent to $272.50.
