BLBG: Gold in New York Rises on Outlook for Interest Rates, Dollar
By Pham-Duy Nguyen
Jan. 5 (Bloomberg) -- Gold futures advanced on speculation that the dollar will extend its slump, boosting the precious metal’s allure as an alternative investment.
The greenback touched a two-week low against a basket of six major currencies on bets that the Federal Reserve will keep its benchmark interest rate at a record low for an extended period. Yesterday, gold climbed the most in two months as the dollar slipped 0.4 percent against the basket. The metal reached a record $1,227.50 an ounce on Dec. 3.
“The weak dollar and slow economic recovery will continue to enable gold to compete with other asset classes for the marginal investment dollar,” said Tom Pawlicki, an MF Global Inc. analyst in Chicago. He predicted the price will climb to $1,350 this year.
Gold futures for February delivery rose 40 cents to $1,118.70 on the Comex division of the New York Mercantile Exchange. Earlier, the most-active contract reached $1,129.60, the highest price since Dec. 17. Futures jumped 2 percent yesterday.
The dollar slid 4.2 percent last year as the Fed kept bank borrowing costs at near zero percent to revive the U.S. economy.
Today, the U.S. Dollar Index, the six-currency gauge, dropped as much as 0.6 percent 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. An industry report showed the number of purchase contracts for previously occupied U.S. homes fell more than analysts forecast in November from October.
Gold Outlook
Optimism that global economic growth will gain momentum in 2010 is pushing up equity and commodity markets. Gold will be the “place to be” for investors this year, said Peter McGuire, a managing director at CWA Global Markets Pty in Sydney.
“The trend will continue,” he said. “It will be a strong year for precious metals.”
Gold’s gains were limited as the dollar erased earlier losses near the end of floor trading. In London, gold for immediate delivery fell $3.30, or 0.3 percent, to $1,117.90 an ounce at 7:29 p.m. local time.
In New York, silver futures for March delivery rose 33.7 cents, or 1.9 percent, to $17.80 an ounce. The metal gained 49 percent last year, while gold climbed 24 percent.
To contact the reporter on this story: Pham-Duy Nguyen in Seattle at pnguyen@bloomberg.net.
