BLBG: Gold Rises Most in Two Months as Dollar’s Weakness Spurs Buying
By Pham-Duy Nguyen and Nicholas Larkin
Jan. 4 (Bloomberg) -- Gold rose the most in two months after a weaker dollar boosted demand for an alternative investment.
The dollar fell as much as 0.7 percent against a basket of six currencies, extending last year’s 4.2 percent decline. Gold rose 24 percent in 2009 and reached a record $1,227.50 an ounce on Dec. 3. A 7.3 percent drop in bullion prices last month also spurred purchases.
“You’re seeing this pop in gold because the dollar is getting sold on the first day of trading,” said Matt Zeman, a metals trader at LaSalle Futures Group Inc. in Chicago. “Those who held their longs through last month’s correction are adding to their positions. Gold’s behavior is indicative of a bull market.”
Gold futures for February delivery climbed $25.90, or 2.4 percent, to $1,122.10 an ounce at 9:33 a.m. on the New York Mercantile Exchange’s Comex unit. A close at that price would mark the biggest gain for a most-active contract since Nov. 3.
Gold for immediate delivery in London was 2.3 percent higher at $1,122.60 an ounce.
Gold may average $1,150 an ounce this year and $1,300 in 2011, partly on demand from central banks and investors, according to Helen Henton, the head of commodity research in London at Standard Chartered Plc and the most accurate gold forecaster in a Bloomberg precious-metals survey a year ago. The metal for immediate delivery averaged about $974 an ounce last year.
Annual Gains
December’s decline in gold futures was the first in four months and the biggest drop since October 2008. Gold has gained for nine straight years, more than tripling in the past decade.
“We expect investors will remain dip-buyers, increasing exposure to offset devaluation of fiat currencies,” James Moore, an analyst at London-based TheBullionDesk.com, wrote today in a report.
The dollar slumped last year as the Federal Reserve kept benchmark interest rates near zero percent to spur growth after the worst financial crisis since World War II. That bolstered demand for dollar-denominated raw materials from oil to coffee by making them cheaper for those holding other currencies.
Exchange-Traded Funds
Investors poured about $60 billion into commodities through index-tracking and exchange-traded funds and medium- term notes last year, and should at least match that in 2010, according to a Barclays Capital survey.
Raw materials may return more than financial assets for the first time in three years as the global economy rebounds, according to Bloomberg surveys and 2009’s most accurate commodity forecasters. Oil, corn, gold and palladium will advance as much as 17 percent this year, the analysts said.
Silver futures for March delivery added 56 cents, or 3.3 percent, to $17.405 in New York. The metal rose 49 percent in 2009.
To contact the reporters on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net; Pham-Duy Nguyen in Seattle at pnguyen@bloomberg.net.
