Gold May Gain on Weakening Dollar; Silver Rises Above $25 to 30-Year High
Oct. 21 (Bloomberg) -- Jim Rogers, chairman of Rogers Holdings, talks about his investment strategy for commodities and the outlook for the Chinese economy. Rogers speaks from Singapore with Andrea Catherwood on Bloomberg Television's "The Pulse." (Source: Bloomberg)
Oct. 25 (Bloomberg) -- George Gero, senior vice president at RBC Capital Markets, talks about commodity prices, investment opportunities and the dollar's performance. Gero speaks with Carol Massar and Matt Miller on Bloomberg Television's "Street Smart." (Source: Bloomberg)
Gold may gain in New York as a weakening dollar boosts demand for precious metals as an alternative investment. Silver jumped to a 30-year high of more than $25 an ounce and palladium reached a nine-year high.
The U.S. Dollar Index, a six-currency gauge of the greenback’s strength, fell to a one-week low on speculation the Federal Reserve will this week announce further measures to keep borrowing costs low to spur growth. Gold futures, which usually move inversely to the greenback, reached a record $1,388.10 an ounce on Oct. 14.
“The theme of background dollar weakness has continued,” said James Moore, an analyst at TheBullionDesk.com in London. “We expect dip-buying to continue with reaction to the Fed policy meeting Wednesday potentially triggering a fresh influx of demand to precious metals as investors focus on wealth protection.”
Gold futures for December delivery added $2.90, or 0.2 percent, to $1,360.50 an ounce at 8 a.m. on the Comex in New York. The metal for immediate delivery in London was 0.1 percent higher at $1,360.45. Spot prices reached an all-time high $1,387.35 on Oct. 14.
Bullion rose to $1,361.50 an ounce in the morning “fixing” in London, used by some mining companies to sell output, from $1,346.75 at the afternoon fixing on Oct. 29.
Precious metals have gained this year as central banks maintained low interest rates and governments spent trillions of dollars to spur growth. Silver has advanced 48 percent in 2010 and palladium has surged 60 percent, both beating gold’s 24 percent rise. Precious metals have outperformed global equities, Treasuries and most industrial metals, boosting investment in exchange-traded products backed by the metals.
Asset Purchases
The Fed will meet on Nov. 2-3 and policy makers are expected to announce another round of government bond purchases, a policy known as quantitative easing, after they bought $1.7 trillion in debt from December 2008 to March. Concern about possible further monetary easing in the U.S. has supported prices.
Estimates of the size of the Fed’s next round of asset purchases range from $1 trillion at Bank of America-Merrill Lynch to $2 trillion at Goldman Sachs Group Inc. Economists at both firms agree the Fed may start with a $500 billion plan.
“While the decision on further monetary easing has the potential to disappoint given the strong market performance over the past several weeks, we think the longer-term threat of uncertainty and inflation could limit” declines for metals, analysts led by Hussein Allidina at Morgan Stanley wrote in a report today.
ETP Holdings Retreat
China should buy gold and oil overseas with foreign- exchange reserves to avoid losses from a weakening dollar, Shao Fenggao, an official at China Construction Bank Corp., wrote in a commentary published in the China Business News today. Iran has changed some 15 percent of its foreign-exchange reserves into gold and won’t need to import the metal for the next 10 years, news agency Mehr reported Oct. 30, citing Central Bank Governor Mahmoud Bahmani.
Gold assets in ETPs dropped 1.96 metric tons to 2,087.5 tons on Oct. 29, an 11th consecutive decline, according to data compiled by Bloomberg from 10 providers. Holdings reached a record 2,104.65 tons on Oct. 14. Silver assets dropped 74.84 tons to 14,186.28 tons on Oct. 29, data from four providers show.
Silver for December delivery in New York gained as much as 2 percent to $25.055 an ounce, the highest price since March 1980, and was last up 1.7 percent at $24.97. The metal reached an all-time high of $50.35 in New York in 1980, a year after the Hunt brothers tried to corner the market.
An ounce of gold bought as little as 54.3652 ounces of silver in London today, the smallest amount since August 2008, before the collapse of the Lehman Brothers Holdings Inc. triggered the worst recession since World War II.
Palladium for December delivery rose 1.5 percent to $654.55 an ounce after earlier climbing to $657.30, the highest price since May 2001. Platinum for January delivery added 0.9 percent to $1,723 an ounce.
To contact the reporter on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net;
To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net.
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