BLBG: Gold May Extend Biggest Gain in Two Months as Dollar Declines
By Nicholas Larkin and Kim Kyoungwha
Jan. 5 (Bloomberg) -- Gold, little changed in London today, may extend its biggest gain in two months as a weaker dollar boosts the metal’s appeal as an alternative investment. Platinum and palladium reached the highest prices in at least 16 months.
The U.S. Dollar Index, a six-currency gauge of the greenback’s value, fell as much as 0.6 percent today to a two- week low. Bullion gained 2.2 percent yesterday, the most since Nov. 3, and rallied 24 percent in 2009 as investors hedged against a declining dollar.
“The weaker dollar and broad commodity gains should continue to push gold higher in coming sessions,” James Moore, an analyst at London-based TheBullionDesk.com, said in a report. “The market should continue to be underpinned by investment and physical dip-buying.”
Gold for immediate delivery advanced as much as $6.75, or 0.6 percent, to $1,127.95 an ounce, the highest price since Dec. 17. The metal traded at $1,122.63 at 11:07 a.m. local time. Gold for February delivery rose 0.4 percent to $1,122.90 an ounce on the New York Mercantile Exchange’s Comex division.
The metal increased to $1,125.25 an ounce in the morning “fixing” in London, used by some mining companies to sell production, from $1,121.50 at yesterday’s afternoon fixing.
The dollar slid last year as the Federal Reserve held interest rates near zero to revive the U.S. economy. Gold reached a record $1,226.56 an ounce on Dec. 3. The U.S. currency dropped today as traders reduced bets that the Fed will raise its target rate for overnight bank loans by at least a quarter- percentage point by its June meeting.
Dollar Outlook
“The defining agent of this year’s action will once again be the path that the dollar eventually takes,” Jon Nadler, a senior analyst with Kitco Metals Inc. in Montreal, wrote in a report.
Rising optimism that global economic growth will gain more momentum in 2010 is pushing up stock and commodity markets, reviving demand for alternative investments at the expense of the dollar. Gold will be the “place to be” for investments in 2010, Peter McGuire, managing director at CWA Global Markets Pty in Sydney, said in an interview today.
“The trend will continue,” he said. “It will be a strong year for precious metals.”
Gold holdings in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, declined 4.88 metric tons to 1,128.75 tons yesterday, according to the company’s Web site.
Among other metals for immediate delivery in London, silver was little changed at $17.58 an ounce. Platinum added as much as 0.4 percent to a 16-month high of $1,531.25 an ounce and last traded at $1,528. Palladium climbed as much as 1.2 percent to $426.38 an ounce, the highest since July 2008, and was last at $424.25.
To contact the reporters on this story: Kyoungwha Kim in Singapore at kkim19@bloomberg.net; Nicholas Larkin in London at nlarkin1@bloomberg.net
