BLBG: Gold May Increase as Dollar Falls for First Time in Three Days
By Nicholas Larkin and Glenys Sim
Oct. 26 (Bloomberg) -- Gold, little changed in London today, may gain as the dollar dropped for the first time in three days, increasing the appeal of the metal as an alternative investment.
The U.S. Dollar Index, which measures the greenback against six currencies, fell as much as 0.4 percent as signs the global economy is recovering reduced demand for the dollar as a refuge. Gold, which typically moves inversely to the U.S. currency, climbed to a record $1,070.80 an ounce on Oct. 14.
“A lot of people are looking at the performance of the dollar,” Afshin Nabavi, a senior vice president at bullion refiner MKS Finance SA in Geneva, said by phone. “We’re seeing some light physical demand picking up, particularly from the Far East. Traders are likely to buy on dips.”
Gold for immediate delivery lost 90 cents, or 0.1 percent, to $1,054.50 an ounce by 11:18 a.m. in London. The metal rose 0.2 percent last week, the ninth weekly gain in 10. December gold futures fell 0.1 percent to $1,055 on the New York Mercantile Exchange’s Comex division.
The metal slipped to $1,055 an ounce in the morning “fixing” in London, used by some mining companies to sell production, from $1,061.75 at the afternoon fixing on Oct. 23. Spot prices are up 4.7 percent this month as the dollar index has lost 1.8 percent.
Dollar-Driven
“The dollar will continue to drive gold,” said Tetsuya Yoshii, vice president for derivative products at Mizuho Corporate Bank Ltd. “After the big run-up in prices two weeks ago, gold will probably stay around these levels before testing higher again.”
Gold jumped 4.6 percent in the week ended Oct. 9, the biggest weekly advance since April.
Bullion holdings in the SPDR Gold Trust, the biggest exchange-traded fund backed by the metal, were unchanged for a second day at 1,108.09 metric tons on Oct. 23, according to the company’s Web site. The fund’s holdings climbed to an all-time high of 1,134 tons on June 1.
“All the action right now is investor-led and based on larger financial flows, most importantly the suggestion that the dollar is losing its global currency status,” Fortis Bank NV and VM Group said in a report e-mailed today. “It’s premature to put much faith in that, however. If the dollar regains esteem, gold could get savaged.”
Bullion is unlikely to trade above $1,000 an ounce in the “long run,” Patrice Motsepe, chairman of Harmony Gold Mining Co., said in the company’s annual report published today. The recent rally “has been largely driven by short-term factors,” he said.
Among other precious metals for immediate delivery in London, silver lost 0.2 percent to $17.65 an ounce. Platinum was little changed at $1,359 an ounce, while palladium was 0.3 percent lower at $334.50 an ounce.
Silver held in ETF Securities Ltd.’s exchange-traded products rose 0.9 percent to a record 21.399 million ounces on Oct. 23, the company’s Web site showed. Palladium holdings increased 1.6 percent to a record 562,523 ounces.
