Demand for Alternative to Slumping DollarGold Prices Climb on Demand for Alternative to Slumping Dollar
By Pham-Duy Nguyen
Oct. 5 (Bloomberg) -- Gold futures rose in New York as the dollar weakened, boosting the appeal of the precious metal as an alternative investment.
The greenback fell as much as 0.4 percent against a basket of six major currencies. Before today, gold gained 14 percent this year, while the dollar declined 5.3 percent.
“The dollar is moving a little lower, and that’s giving gold a pop,” said Matt Zeman, a LaSalle Futures Group metals trader in Chicago.
Gold futures for December delivery climbed $7.60, or 0.8 percent, to $1,011.90 an ounce at 12:38 p.m. on the New York Mercantile Exchange’s Comex division. Earlier, the metal dropped as much as 0.3 percent.
The U.S. Dollar Index, which includes the euro and yen among the currencies of six U.S. trading partners, has dropped 14 percent from a three-year high of 89.624 on March 4.
“Gold is finding support out of dollar weakness,” said Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago. “Hard breaks have found nothing but buying. Gold is building stamina to take out the old record.”
Futures reached $1,033.90 on March 17, 2008, the all-time high in New York.
Holdings in the SPDR Gold Trust, the biggest exchange- traded fund backed by the metal, rose 1.22 metric tons to 1,096.55 tons as of Oct. 2, data on the company’s Web site shows.
Hedge-fund managers and other large speculators trimmed their bets on rising New York futures in the week ended Sept. 29, the U.S. Commodity Futures Trading Commission said last week. Net-long positions fell 2.3 percent to 231,386 contracts.
Gold may be too expensive to lure buyers when it rises past $1,000, Zeman said.
“If investors can’t push the dollar much lower, then gold’s rally is dead in its track,” Zeman said. “No one wants to step in and buy above $1,000.”
Silver futures for December delivery rose 24.5 cents, or 1.5 percent, to $16.475 an ounce on the Comex. Before today, silver gained 44 percent this year.
To contact the reporter on this story: Pham-Duy Nguyen in Seattle at pnguyen@bloomberg.net.
Last Updated: October 5, 2009 12:41 EDT