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Gold Extends Rally to Record as Dollar's Slump Spurs Demand From Investors

Gold rose to a record for the eighth time in two weeks as the dollar dropped to the lowest level since early February, boosting investor demand. Silver extended gains, reaching the highest price since 1980.

Prices jumped to an all-time high of $1,311.80 an ounce on the Comex in New York. Futures are up 19 percent this year, heading for the 10th straight annual gain and the longest rally since at least 1975. The dollar fell against a basket of major currencies, including the euro and yen, to the lowest level since Feb. 3.

“The sell-off in the dollar has taken gold off its lows,” said Adam Klopfenstein, a senior market strategist at Lind- Waldock in Chicago. “From here, it’s going to be a momentum trade, and you’re going to see new buying take gold to new highs.”

Gold futures for December delivery rose $9.70, or 0.7 percent, to settle at $1,308.30 an ounce at 1:30 p.m. on the Comex, the fifth straight gain. Earlier, gold shed $22.40, or 1.7 percent, the biggest intraday decline since July 27.

“People are buying every dip in gold,” said Leonard Kaplan, the president of Prospector Asset Management in Evanston, Illinois. “The trend isn’t going to change until interest rates rise.”

In London, gold for immediate delivery reached a record $1,310.20.

“Physical demand is still there,” said Afshin Nabavi, a senior vice president at bullion refiner MKS Finance SA in Geneva. “We saw some Far-Eastern buyers, and some Indian interest.”

Dollar Near Crisis

Gold rebounded after the dollar fell, traders said. The greenback is “one step nearer” to a crisis as debt levels rise, according to Yu Yongding, a former adviser to China’s central bank.

The Federal Reserve is expected to keep the benchmark interest rate between zero and 0.25 percent for an extended period to help the U.S. economy grow. The rate has been at that record-low level since December 2008.

Gold miners will return to hedging, according to 77 percent of participants in a survey at the London Bullion Market Association conference in Berlin today. Some companies such as AngloGold Ashanti Ltd. have reduced or eliminated hedges, betting that prices will continue to climb.

Dennis Gartman, an economist and the editor of the Suffolk, Virginia-based Gartman Letter, said he may begin holding mining stocks after Barrick Gold Corp., the world’s biggest producer, reduced the cost of extracting the metal to $358 an ounce.

‘Owning Miners’

“As gold prices have risen, Barrick’s pretax profit margin has expanded,” Gartman said. “In the future, we may explore the idea of owning miners.”

Holdings in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, were unchanged at 1,300.52 metric tons as of yesterday, according to figures on the company’s website. Major holders include billionaire John Paulson’s New York-based Paulson & Co.

Gold is “a great asset for people who are rich and who want to stay rich,” Graham Birch, a former manager of BlackRock Inc.’s BGF World Gold Fund, said yesterday at the LBMA conference in Berlin. “It’s not so good an asset for people who are poor and who want to get rich.”

Silver futures for December delivery jumped 23.6 cents, or 1.1 percent, to settle at $21.707 an ounce on the Comex. Earlier, the metal touched $21.775, the highest for a most- active contract since October 1980.

Platinum futures for January delivery rallied $5.70, or 0.3 percent, to $1,640.70 an ounce on the New York Mercantile Exchange, and palladium futures for delivery in December rose $8.25, or 1.5 percent, to $560.45 an ounce.

To contact the reporters on the story: Pham-Duy Nguyen in Seattle at pnguyen@bloomberg.net; Claudia Carpenter in London at ccarpenter2@bloomberg.net.

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net

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