Jan. 4 (Bloomberg) -- Gold traded near a three-week high as
a weaker dollar and inflation concern increased bullion's appeal
as an alternative investment to U.S. stocks and bonds.
The dollar declined for a second day against the euro after
a report yesterday showed the pace of U.S. manufacturing slowed
and on signals Federal Reserve policy makers are almost finished
raising interest rates. Gold for immediate delivery jumped 3.34
percent yesterday, the largest daily gain since September 2001.
``The gold gains seem to be driven by the dollar,'' Warwick
Schneller, an analyst at Commodity Warrants Australia Pty in
Sydney, said by phone. ``The surge was sparked by the dollar's
biggest decline in three months against the euro.''
Gold for immediate delivery rose as much as $1.55, or 0.3
percent, to $535.70 an ounce, before falling to $533.96 at 4:59
p.m. Sydney time. It touched a 24-year high of $541 an ounce on
Dec. 12 as investors diversified from stocks, bonds and
currencies on concern about inflation.
``Gold may face resistance when it hits $541 as it reaches
that 24-year high,'' said Commodity Warrants' Schneller.
Resistance is a price level where a security is expected to
receive sell orders.
Gold for delivery in February rose as much as $5.20, or 1
percent, to $537.70 an ounce in after-hours trading on the Comex
division of the New York Mercantile Exchange. It traded at
$536.00 at 4:54 p.m. Sydney time.
The Institute for Supply Management said yesterday its
factory index fell in December to the lowest since August. The
U.S. Federal Reserve has increased its benchmark interest rates
13 times since June 2004, and minutes of its Dec. 13 meeting,
issued yesterday, said this policy outlook ``was becoming
considerably less certain.''
India, Tokyo
Against the euro, the dollar fell as much as 0.54 percent
to $1.2083 today from $1.2018 late New York yesterday, according
to electronic foreign-exchange dealing system EBS. It traded at
$1.2063 to the euro at 3:00 p.m. Tokyo time. A falling dollar
makes the U.S.-currency denominated metal cheaper to purchase
for investors using the euro.
The correlation coefficient for gold and the euro is 0.63.
That measures the coincidence of closing daily gains and
declines in the past two years on a scale of -1, meaning prices
move opposite each other, to 1, meaning they move in lockstep.
In India, the world's biggest consumer, gold prices for
February delivery rose 66 rupees, or 0.85 percent, to 7,859
rupees per 10 grams, or 24,441 rupees ($545) per ounce, at 11:30
a.m. on the Multi Commodity Exchange of India Ltd. in Mumbai.
In Tokyo, gold for delivery in December 2006 rose 41 yen a
gram, or 2.1 percent, to settle at 2,014 yen a gram, or 62,635
yen ($541) an ounce, on the Tokyo Commodity Exchange. That's the
highest close since Dec. 13, 2005.
Russia, Ukraine
Some investors are also buying the precious metal to hedge
against concern rising energy costs will fuel inflation as crude
oil in New York yesterday reached a two-month high after a
dispute between Russia and Ukraine over natural gas prices.
`A lot of gold-buying is speculative and a lot of
investment funds are buying into it, in particular with the
situation with Russia and Ukraine,'' said Lucinda Chan, Sydney-
based head of Asian business at Macquarie Equities Ltd. ``With
oil prices being choppy, gold will run on the same basis. Gold
tends to be inflation related, and there's concern about the
specter of rising costs now.''
Some investors buy gold in times of inflation, which erodes
the value of fixed-income assets such as bonds. Gold futures
surged to a record $873 an ounce in New York in 1980, when
consumer prices rose more than 12 percent from the year before.
To contact the reporters on this story:
Tan Hwee Ann in Melbourne at
hatan@bloomberg.net ;
