Gold Rebounds From Biggest Drop in Four Months as Debt Concerns Increase

Gold rose, rebounding from the biggest loss in four months, on bets that mounting sovereign debt will erode currencies and boost demand for the precious metal as an alternative asset.

The euro fell against the dollar on concern that Ireland may need a bailout. Gold has gained 25 percent this year, touching a record $1,424.30 an ounce on Nov. 9 partly on speculation that the Federal Reserve’s program to buy back bonds will erode the dollar.

“Demand for gold as an alternative currency is alive and well,” said Frank Lesh, a trader at FuturePath Trading in Chicago. “The fiscal and debt problems of the West will continue to support gold.”

Gold futures for December delivery rose $3, or 0.2 percent, to settle at $1,368.50 at 2:06 p.m. on the Comex in New York. On Nov. 12, the metal lost 2.7 percent, the most since July 1. The price is headed for the 10th straight annual gain.

European leaders are meeting in Brussels tomorrow to discuss financial support for Ireland. Gold priced in euros reached a record in June on investor concern that Greece would be bankrupt.

“Gold benefited in May and June when sovereign-debt concerns were at their peak,” said Tom Pawlicki, an analyst at MF Global Holdings Ltd. in Chicago. “There’s the potential that gold resumes its role as a safe haven if problems with European- sovereign debt continue to grow.”

Limited Rally

Gains for precious metals may be limited for the rest of the year as fund managers book profits, said Lesh of FuturePath.

“Gold has hit its objectives on the upside and given people huge profits for the year, so people are paring back their positions,” Lesh said.

Silver futures for December delivery rose 15 cents, or 0.6 percent, to $26.092 an ounce on the Comex. The metal has gained 55 percent this year.

Palladium futures for December delivery rose $7.65, or 1.1 percent, to $681.30 an ounce on the New York Mercantile Exchange. Platinum for January delivery added $1.20, or 0.1 percent, to $1,685.80 an ounce on the Nymex.

Palladium has gained 67 percent in 2010 and platinum has rallied 15 percent.

To contact the reporter on this story: Pham-Duy Nguyen in Seattle at pnguyen@bloomberg.net.

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

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