BLBG: Gold May Rise for First Time in a Week as Dollar Spurs Demand
By Nicholas Larkin and Kim Kyoungwha
Feb. 1 (Bloomberg) -- Gold, little changed in London today, may rise for the first time in a week as a pause in the dollar’s rally spurs demand for the metal as an alternative investment.
The dollar lost as much as 0.4 percent against the euro after earlier gaining to a six-month high. Gold, which typically moves inversely to the greenback, fell 1.1 percent last week, a third consecutive decline, as the dollar climbed 2 percent.
“The U.S. currency is the key at the moment,” Andrey Kryuchenkov, an analyst at VTB Capital in London, said today in a report. Still, “clear evidence of renewed and persistent physical buying” is needed for prices to rally, he said.
Gold for immediate delivery added $2.10, or 0.2 percent, to $1,082.95 an ounce at 9:46 a.m. local time. Prices declined 1.5 percent last month. Bullion for April delivery was 30 cents lower at $1,083.50 on the New York Mercantile Exchange’s Comex unit.
The metal advanced 24 percent last year as the Federal Reserve held interest rates near zero to spur growth, helping to send the U.S. Dollar Index, a six-currency gauge of the greenback’s strength, down 4.2 percent. The metal, which reached a record $1,226.56 an ounce on Dec. 3, declined for a second month in January as the dollar index rallied 2.1 percent.
The index advanced for a fourth day on Jan. 29 as government figures showed that the U.S. economy expanded by 5.7 percent in the fourth quarter, the fastest pace in six years.
Interest Rates
“The dollar’s sustained rally is spooking sentiment for gold,” said Hwang Il Doo, a senior trader at KEB Futures Co. in Seoul. “Signs of an improving U.S. economy are raising speculation that an interest-rate hike could come earlier than anticipated.”
Holdings in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, were unchanged for an eighth day at 1,111.92 metric tons on Jan. 29, according to the company’s Web site.
Still, gold prices near the lowest level in three months may help attract some buyers.
“We’re seeing some bargain-hunters active as physical buyers, and that’s supportive,” said Kate Harada, a trader at Mitsubishi Corp. Futures & Securities Ltd. in Tokyo. “The dollar index is still the key.”
Among other precious metals for immediate delivery in London, silver added 0.7 percent to $16.3125 an ounce. Platinum rose 1 percent to $1,520 an ounce and palladium was 0.5 percent higher at $419.50 an ounce.
ETF Securities Ltd.’s platinum holdings in its U.S. exchange-traded product rose to 244,941 ounces on Jan. 29, according to the company’s Web site. The company’s European and Australian platinum assets declined 1.2 percent to 415,458 ounces on Jan. 29.
To contact the reporters on this story: Kyoungwha Kim in Singapore at kkim19@bloomberg.net; Nicholas Larkin in London at nlarkin1@bloomberg.net.
