BLBG: Gold Advances in London as Weaker Dollar Spurs Investor Demand
By Nicholas Larkin and Glenys Sim
Dec. 14 (Bloomberg) -- Gold rose in London as a weaker dollar spurred investors to buy bullion to hedge against further declines in the currency.
The U.S. Dollar Index, a measure against six counterparts, fell as much as 0.4 percent after Abu Dhabi pledged to bail out Dubai. Gold, which typically moves inversely to the dollar, dropped to four-week low of $1,109.55 an ounce on Dec. 11, as the dollar climbed to a two-month high against the euro.
“We’re seeing weakness in the dollar,” Sagiv Perez, a senior dealer at Finotec Trading U.K. in London, said by phone. “There was such a big correction. Now people are looking for a reason to buy it back.”
Gold for immediate delivery added $8.40, or 0.8 percent, to $1,123.80 an ounce at 10 a.m. local time. The metal dropped 4 percent last week. Bullion futures for February delivery on the New York Mercantile Exchange’s Comex unit were 0.4 percent higher at $1,124.80.
Bullion has tumbled 8.4 percent from a record $1,226.56 on Dec. 3, while the Dollar Index advanced 2.3 percent.
“The performance of the dollar will continue to determine gold’s direction,” said Zhu Bin, president of futures research at Nanhua Futures Co., from Hangzhou.
The metal may advance to $1,500 by the middle of next year on concern that inflation will accelerate and purchases by Asian central banks, Societe Generale said in a report today. Precious metals may rally “sharply” in the next two quarters, outpacing other commodities, the bank said.
Gold holdings in the SPDR Gold Trust, the biggest exchange- traded fund backed by the metal, were unchanged for a third day at 1,116.25 metric tons on Dec. 11, its Web site showed. They reached a record 1,134 tons on June 1.
Among other precious metals for immediate delivery in London, silver added 0.7 percent to $17.28 an ounce. Platinum gained 0.3 percent to $1,433 an ounce and palladium was little changed at $364.25 an ounce.
To contact the reporters on this story: Glenys Sim in Singapore at gsim4@bloomberg.net; Nicholas Larkin at nlarkin1@bloomberg.net
