BLBG: Gold Gains, Ending Three-Day Drop, as Weak Dollar Boosts Demand
Sept. 22 (Bloomberg) -- Gold rose for the first time in four days in London as a sliding dollar boosted demand for the precious metal as an alternative investment.
The U.S. Dollar Index, a six-currency gauge of the currency’s strength, slipped as much as 1 percent as signs the global economy is recovering spurred investors to buy higher- yielding assets. The measure has dropped 6.4 percent this year as gold, trading 1.6 percent below a record $1,032.70 an ounce set in March 2008, has climbed 16 percent.
“It’s mainly dollar driven” and “in the longer term we still expect more dollar weakness,” Walter de Wet, a London- based Standard Bank Ltd. analyst, said today by phone. “When we approached the mid-$990 level, there was some physical buying coming in and providing some support.”
Immediate-delivery bullion gained $13.78, or 1.4 percent, to $1,017.47 an ounce by 12:08 p.m. local time. The commodity yesterday dropped as low as $995.97 an ounce. December gold futures were 1.4 percent higher at $1,018.80 an ounce on the New York Mercantile Exchange’s Comex division.
The metal advanced to $1,015.75 in the morning “fixing” in London, used by some mining companies to sell production, from $997 at yesterday’s afternoon fixing. Spot prices have climbed the past five weeks.
The dollar also weakened on speculation that Group of 20 leaders, meeting in Pittsburgh on Sept. 24-25, will call for a reduction in global trade imbalances. The greenback slid to its lowest level in a year against the euro.
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 tons yesterday, data on the company’s Web site showed. The fund’s holdings reached a record 1,134.03 tons on June 1. Gold held in ETF Securities Ltd.’s exchange-traded products added 0.3 percent to a record 8.323 million ounces yesterday, its Web site showed. The company’s data exclude products listed in the U.S.
Risk to Gold
The “increase in SPDR holdings yesterday is encouraging as investors become acclimatized to four-digit prices,” James Moore, an analyst at TheBullionDesk.com in London, said in a report. “We still see gold at the greatest risk to a downside correction, particularly should the G-20 agree to strong changes on banking and trading operations.”
Global leaders meet this week seeking to deliver the broadest financial regulation overhaul since the 1930s, potentially threatening profits and stock prices of banks. The G-20 will discuss forcing banks to curb leverage, hold more equity capital and keep a greater pool of assets that can be easily traded.
Silver for immediate delivery in London gained 2.4 percent to $17.2425 an ounce. Platinum added 0.8 percent to $1,330.40 an ounce, while palladium was 1 percent higher at $300.55 an ounce.
ETF Securities’ palladium holdings increased 0.9 percent to a record 504,966 ounces, while platinum assets climbed 2.5 percent to 354,967 ounces.
Platinum has “superior long-term supply and demand fundamentals,” John Reade, UBS AG’s head metals strategist in London, wrote in a note today. “We look to buy platinum on a dip as we remain wary” of large speculative long positions in platinum, he said. A long position is typically a bet on higher prices.
To contact the reporter on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net
