BLBG; Gold Advances to a One-Week High in London as Dollar Declines
Nov. 2 (Bloomberg) -- Gold climbed to a one-week high in London as the dollar’s decline spurred demand for the precious metal as an alternative asset.
Traders who follow charts and graphs made purchases as bullion exceeded the 21-day moving average of $1,049.53 an ounce, said Tobias Merath, head of commodity research at Credit Suisse Group AG in Zurich. The dollar declined against the euro, extending its drop this year to 5.6 percent. Bullion tends to move inversely to the U.S. currency.
“We could have a strong end of year and might even break $1,100 before the end of the year,” Merath said. “The gold rally is founded on three pillars, and the first is dollar weakness.”
Gold for immediate delivery climbed $10.47, or 1 percent, to $1,055.87 an ounce at 9:42 a.m. local time. Prices rose as high as $1,056.82, the highest since Oct. 26, and have jumped 20 percent this year. December gold futures advanced 1.2 percent to $1,052.80 an ounce on the New York Mercantile Exchange’s Comex division.
Bullion also has gained because of low yields, making gold more competitive with assets such as bonds that pay interest, Merath said. He cited “strong investment flows” as the metal’s third support.
Assets in gold are rising as investors put money into new products, Merath said. Still, bullion holdings in the SPDR Gold Trust, the biggest exchange-traded fund backed by the metal, slipped 0.1 percent to 1,103.52 metric tons as of Oct. 30, according to the company’s Web site.
“The dollar is still hovering near very low levels, which makes more cash flow into the market, so there’s still a great chance for a higher price,” said Kate Harada, a senior trader with Mitsubishi Corp. Futures & Securities Ltd. in Tokyo.
Among other precious metals for immediate delivery in London, silver added 1.5 percent to $16.56 an ounce. Platinum gained 0.4 percent to $1,331.25 an ounce, and palladium rose 1.2 percent to $324.23 an ounce.
To contact the reporters on this story: Claudia Carpenter in London at ccarpenter2@bloomberg.net; Kyoungwha Kim in Singapore at kkim19@bloomberg.net
