BLBG: Gold Gains, Ending Three-Day Drop, as Weak Dollar Lifts Demand
Sept. 22 (Bloomberg) -- Gold increased, ending a three-day decline, as the dollar weakened against major global currencies, boosting the appeal of precious metals.
Bullion, which typically moves inversely to the dollar, has risen 14 percent this year as the Dollar Index, a six-currency gauge of the dollar’s strength, has fallen 5.9 percent.
“The dollar is the biggest driver of gold moves these days,” said Jang Joong Shik, head of trading with Hyundai Futures Co. in Seoul. “Still, it needs some consolidation before a further rally in prices is warranted.”
Immediate-delivery gold was up 0.3 percent to $1,006.32 an ounce at 2 p.m. in Singapore. The metal touched $1,024.28 on Sept. 17, the highest since March 2008. December-delivery futures gained 0.3 percent to $1,007.50 an ounce on the New York Mercantile Exchange’s Comex division. The dollar index is down 0.3 percent at 76.58.
Prices could come under pressure after the International Monetary Fund’s executive board approved gold sales of 403.3 tons valued at about $13 billion, according to Commerzbank AG. The IMF pledged to avoid disrupting the market with the transactions.
“There has been speculation for some time whether the gold will be transferred directly from the IMF’s vaults to the vaults of other central banks and will therefore not be relevant to the market,” Eugen Weinberg, an analyst at Commerzbank, wrote in a note yesterday. “However, as no central bank has apparently shown any interest in buying IMF gold, the sale should be via the market.”
IMF Gold
China may buy gold from the IMF at lower prices via the market, which is likely to be “market adverse on the whole,” Weinberg said. China is considering the purchase to diversify its reserves if the price is right and the potential return relatively high, Market News International reported yesterday, citing two unidentified government sources. An official from the People’s Bank of China declined to comment.
Holdings of bullion in the SPDR Gold Trust, the biggest exchange-traded fund backed by the metal, increased 15.26 metric tons to 1,101.73 metric tons as of Sept. 21. The fund’s holdings reached a record 1,134.03 tons on June 1.
Among other precious metals, silver rose 0.7 percent to $16.95 an ounce, while platinum and palladium were both up 0.2 percent at $1,323 and $298 an ounce each.
To contact the reporter on this story: Kyoungwha Kim in Singapore at Kkim19@bloomberg.net
