Gold Climbs to Record for Second Day as Dollar Extends Decline
Oct. 14 (Bloomberg) -- Gold advanced to a record for asecond straight day as investors bought precious metals to hedgeagainst a lower dollar and pickup in inflation.
The Dollar Index, a six-currency gauge of the dollar’svalue, slumped to the lowest level since August 2008 on bets theFederal Reserve will trail other central banks in increasingborrowing costs. Crude oil reached a one-year high of $75.12 abarrel and Asian stocks rose for a second day after Australianconsumer confidence jumped to the highest in more than two years.
“What’s happening is that they are selling out of dollarsand buying equities around the world, currencies and of coursegold,” said Mark Pervan, head of commodity research at ANZBanking Group Ltd. “The dollar is being held hostage toincreased risk appetite.”
Gold for immediate delivery gained as much as 0.5 percentto $1,069.80 an ounce before trading at $1,067.40 an ounce at12:30 p.m. in Singapore. December gold futures also rose to arecord $1,071.10 an ounce on the New York Mercantile Exchange’sComex division. Oil futures, used by some investors as aninflation guide, gained 1.3 percent to $75.08 a barrel in NewYork at 12:31 p.m. Singapore time.
Bullion, which usually moves inversely to the dollar,soared 21 percent this year, heading for a ninth annual gainafter the dollar dropped 7 percent against the currency gauge.The dollar index fell 0.5 percent, dropping for a third day.
‘Bear Market’
The dollar may weaken before a U.S. government reportforecast to show consumer prices gained last month, adding tosigns the economy is recovering and curbing demand for havenassets. Economists in a Bloomberg News survey forecast a 0.2percent increase in September following a 0.4 percent gain inAugust.
“Gold is not in a bull market,” Jon Nadler, a senioranalyst with Kitco Metals Inc., wrote in a note. “The dollar isin bear market.”
President Barack Obama has increased U.S. marketable debtto a record as he borrows to reignite growth in the world’sbiggest economy. That’s boosted speculation increased moneysupply will debase the currency and spur inflation.
The Federal Reserve has cut its main interest rate almostto zero and backed asset purchases and credit programs to combatthe recession. Chairman Ben S. Bernanke is leading plans to buymortgage-backed securities, federal agency debt and Treasuries.
‘Further Gains’
As the dollar slips, gold and silver have outperformed allmajor currencies since the Sept. 15, 2008, announcement ofLehman Brothers Holdings Inc.’s collapse as investors favoredthe metals. Gold has since jumped 36 percent and silver added 61percent.
“A weakening U.S. dollar and easy liquidity conditionswill particularly favor precious metals, and we expect prices ofgold, silver, and platinum all to register further gains overthe next year,” Morgan Stanley’s analysts said in a reporttoday.
Silver jumped 1.2 percent to $17.99 an ounce, platinum roseto a 13-month high of $1,364.50 an ounce before trading at$1,360.75 and palladium added 1 percent to $331.75 an ounce.
To contact the reporter on this story:Kyoungwha Kim in Singapore at Kkim19@bloomberg.net
Last Updated: October 14, 2009 01:01 EDTSource: Bloomberg
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