Gold Climbs on Speculation Interest Rates Will Remain Low; Silver Gains

Gold prices rose in New York for the third time in four days on speculation that the Federal Reserve will boost stimulus measures to spur growth, weakening the dollar and lifting demand for precious metals.

The Fed is likely to announce tomorrow a plan to purchase at least $500 billion of long-term securities, according to a Bloomberg News survey of economists. Before today, gold jumped 8.2 percent since Sept. 1, reaching a record $1,388.10 an ounce on Oct. 14, on bets a second round of unconventional monetary easing will debase the dollar. The greenback slumped 6.3 percent against a six-currency basket in that time.

“Gold is poised to move higher on the weaker dollar,” said Frank Lesh, a trader at FuturePath Trading in Chicago. “The dollar is gold’s main driver, and how much and how fast it moves lower depends on what the Fed says.”

Gold futures for December delivery climbed $3.30, or 0.2 percent, to $1,353.90 an ounce at 10:38 a.m. on the Comex in New York. Before today, the metal surged 23 percent this year.

“The whole world is expecting a substantial amount of quantitative easing from the Fed,” said Frank McGhee, the head dealer at Integrated Brokerage Services in Chicago. “If it’s just talk, then gold is mispriced.”

The U.S. central bank has kept its target interest rate at zero percent to 0.25 percent since December 2008, making gold more competitive against stocks and bonds. The metal doesn’t pay dividends or interest and has added costs for storage and insurance.

Australia Lifts Rates

Gold traded in Australian dollars fell after the central bank unexpectedly raised interest rates, ending a five-month pause. In India, the central bank boosted borrowing costs for the sixth time this year. Bullion is mostly traded in U.S. dollars.

“Rising interest rates should be bad for gold, but they’re not perceived to be widespread enough to impact” prices in U.S.-currency terms, said Jonathan Spall, a product manager for precious metals at Barclays Capital in London. “A number of people are now saying quantitative easing in many countries will never end.”

Silver futures for December delivery rose 24.3 cents, or 1 percent, to $24.795 an ounce on the Comex.

Platinum futures for January delivery climbed $8.10, or 0.5 percent, to $1,719.60 an ounce on the New York Mercantile Exchange. Palladium futures for December delivery were little changed at $648.65 an ounce.

To contact the reporters on this 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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