Gold Futures Advance as Greek Rescue Spurs Demand for Dollar Alternative
Bloomberg
Gold rose for a second day on signs that investors are buying the precious metal as an alternative to a slumping dollar.
The U.S. currency fell for a second day against the euro as Greece moved closer to completing its debt swap. European Central Bank President Mario Draghi said inflation will probably breach the bank’s 2 percent limit this year even as the economy stalls. The ECB kept its benchmark interest rate at a record low of 1 percent. The MSCI All-Country World Index (MXWD) jumped as much as 1 percent
“It finally looks as if Greece will pull through, and the sentiment overall is positive,” Rick Trotman, a senior research analyst at MLV & Co. in New York, said in a telephone interview. “The risk-on mentality seems to be back for now.”
Gold futures for delivery in April rose 0.8 percent to $1,696.50 an ounce at 9:30 a.m. on the Comex in New York. Prices advanced 0.7 percent yesterday.
Bullion assets in exchange-traded products expanded for a sixth straight session yesterday to a record 2,407.021 metric tons, now valued at about $131 billion, according to data compiled by Bloomberg.
The possibility of a third economic stimulus from the Federal Reserve is the key to determining gold’s next move, UBS AG said in an e-mailed report today.
Silver futures for May delivery increased 0.5 percent to $33.75 an ounce on the Comex. The commodity’s 20 percent gain this year through yesterday is the biggest among precious metals.
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Gold Rises to Four-Week High on Demand for Alternative to Dollar, Equities
Bloomberg
Gold futures rose to a four-week high as the slumping dollar and a decline in U.S. equities boosted demand for the precious metal as an alternative asset.
The Standard & Poor’s 500 Index dropped for the first time in a week after a private report showed U.S. companies added fewer jobs than forecast last month. The greenback touched a three-week low against a basket of major currencies. Gold fell 1.3 percent last month after reaching a record $1,577.40 an ounce on May 2.
“The dollar is starting to weaken again,” said Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago. “Stocks are selling off, and there’s a flight to quality into gold.”
Gold futures for August delivery rose $13.50, or 0.9 percent, to $1,550.30 on the Comex in New York. Earlier, the metal reached $1,551.60, the highest since May 2. Before today, the price gained 26 percent in the past 12 months.
U.S. manufacturing expanded in May at the slowest pace in more than a year. The Institute for Supply Management’s factory index fell more than projected to 53.5, the lowest since September 2009, from 60.4 in April, the Tempe, Arizona-based group said today.
The Federal Reserve has kept its benchmark interest rate at zero percent to 0.25 percent since December 2008 and pledged to buy $600 billion in Treasuries through the end of June as a part of a so-called quantitative-easing program to help revive the economy.
“There’s a lot of iffiness about the end of QE2 and questions about whether there will be a QE3,” said Matt Zeman, a strategist at Kingsview Financial in Chicago. “There’s a serious soft patch in economic data, and the Fed is not going to be able to raise interest rates anytime soon. That’s going to be a dollar negative and gold positive.”
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Gold Rebounds From Biggest Drop in Four Months as Debt Concerns Increase
Bloomberg
Pham-Duy Nguyen
Gold rose, rebounding from the biggest loss in four months, on bets that mounting sovereign debt will erode currencies and boost demand for the precious metal as an alternative asset.
The euro fell against the dollar on concern that Ireland may need a bailout. Before today, gold gained 25 percent this year, touching a record $1,424.30 an ounce on Nov. 9 partly on speculation that the Federal Reserve’s program to buy back bonds will erode the dollar.
“Demand for gold as an alternative currency is alive and well,” said Frank Lesh, a trader at FuturePath Trading in Chicago. “The fiscal and debt problems of the West will continue to support gold.”
Gold futures for December delivery rose $10.30, or 0.8 percent, to $1,375.80 at 12:05 p.m. on the Comex in New York. On Nov. 12, the metal lost 2.7 percent, the most since July 1. The price is headed for the 10th straight annual gain.
European leaders are meeting in Brussels tomorrow to discuss financial support for Ireland. Gold priced in euros reached a record in June on investor concern that Greece would be bankrupt.
“Gold benefited in May and June when sovereign-debt concerns were at their peak,” said Tom Pawlicki, an analyst at MF Global Holdings Ltd. in Chicago. “There’s the potential that gold resumes its role as a safe haven if problems with European- sovereign debt continue to grow.”
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