Gold Gains in London as Weak Dollar, Four-Day Drop Lure Buyers

Dec. 9 (Bloomberg) -- Gold rose in London as prospects for a weaker dollar drew some investors to the metal after its longest losing streak since August. Bullion futures fell in New York.

The U.S. Dollar Index, a gauge of the greenback’s strength against six major currencies, slid as much as 0.6 percent. Bullion fell in London for a fourth day yesterday, touching a three-week low, as the dollar gained and the Bank of Korea described the metal as an “illusion.” The bank said it was unlikely to buy more. Gold usually falls when the dollar climbs.

“The dollar is still the excuse,” said Bernard Sin, the head of currency and metals trading at bullion-refiner MKS Finance SA in Geneva. “We have fallen quite drastically. We might see bargain hunters coming into the market.”

Gold for immediate delivery gained $14, or 1.2 percent, to $1,142.40 an ounce at 4:39 p.m. in London. Futures for February delivery on the New York Mercantile Exchange’s Comex unit slipped 50 cents to $1,142.90 an ounce.

The metal declined to $1,142.25 in the London morning “fixing,” the price used by some mining companies to sell their output, from $1,146.75 at yesterday’s afternoon fixing. Spot prices fell last week, the first such drop since Oct. 30.

“There’s some buying on weakness in gold and oil,” said Ben Westmore, a commodities analyst with National Australia Bank in Sydney. Crude slid for a fifth day yesterday in New York. Oil futures gained today in Nymex trading.

Dollar Hedge

Before today, gold dropped 8 percent in London from a record of $1,226.56 an ounce, reached on Dec. 3, while the dollar index gained 2.7 percent from its lowest level that day. Through yesterday, gold advanced 28 percent this year as investors sought a hedge against a weaker dollar and potential inflation and as central banks in India, Russia and Sri Lanka added to bullion stockpiles.

Holdings in the SPDR Gold Trust, the biggest exchange- traded fund backed by the metal, fell 13.72 metric tons to 1,116.25 tons as of yesterday, according to the company’s Web site. The fund’s holdings reached a record 1,134 tons on June 1.

“We could see some people very excited to get back into gold” after its decline, MKS Finance’s Sin said. “If you’re seeking a safe haven, people will buy gold on dips.”

Among other metals for immediate delivery in London, silver increased 18.5 cents, or 1 percent, to $17.77 an ounce. Futures for March delivery fell 1.7 cents to $17.79 an ounce in Comex trading.

To contact the reporters on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net; Pham-Duy Nguyen in Seattle at pnguyen@bloomberg.net.

To contact the editors responsible for this story: Stuart Wallace at swallace6@bloomberg.net; Steve Stroth at sstroth@bloomberg.net