Gold Fluctuates as Weaker Dollar Spurs Investment Demand; Silver Advances
Dec. 22 (Bloomberg) -- Gijsbert Groenewegen, founder of Silver Arrow Capital Management, talks about the outlook for commodities including copper and gold. Groenewegen, speaking with Matt Miller and Emily Chang on Bloomberg Television's "Street Smart," says a cornering of the copper market could be a "huge problem." (Source: Bloomberg)
Gold fluctuated near a three-week high in New York as a weaker dollar spurred demand for an alternative investment. Silver rose to a 30-year high, and palladium reached the highest level in nine years.
The U.S. Dollar Index, a six-currency gauge of the greenback’s strength, fell to the lowest level in almost two weeks. Gold futures, which typically move inversely to the dollar, reached a record $1,432.50 an ounce on Dec. 7 and yesterday climbed to all-time highs in euros and British pounds.
“With the dollar trading lower, this is providing some support for gold,” Peter Fertig, owner of Quantitative Commodity Research Ltd. in Hainburg, Germany, said today by phone. Investor demand for a protection of wealth amid concerns about European sovereign finances and the effect of so-called quantitative easing in the U.S. may bolster prices, he said.
Gold futures for February delivery lost $2, or 0.1 percent, to $1,411.50 an ounce by 8:23 a.m. on the Comex in New York, after reaching $1,415.40, the highest price since Dec. 7. Prices swung between a gain of 0.1 percent and a loss of 0.2 percent. The metal for immediate delivery in London was little changed at $1,412.10.
Borrowing Costs
Gold advanced 29 percent this year, heading for a 10th annual gain as investors lost confidence in currencies and bought precious metals to protect wealth. Prices climbed as governments spent trillions of dollars and central banks kept interest rates low to revive growth and concern mounted about the fiscal health of euro-region countries including Ireland.
“There’s no ‘safe’ currency at the moment, so investors choose to park their money in gold,” said Liu Yangyi, a trader at Beijing Zhong Jing He Investment. “Gold will continue to do well as inflationary pressures build on rising commodity prices.”
The dollar index slipped as much as 0.3 percent to the lowest level since Dec. 17. It dropped from this year’s peak in June as the Federal Reserve held borrowing costs near zero and scheduled a second round of Treasury purchases in an effort to stoke the U.S. economy.
Silver for March delivery in New York rose as much as 0.7 percent to $30.93 an ounce, the highest level since March 1980, and was last at $30.78. Futures reached an all-time high of $50.35 in 1980, a year after the Hunt brothers tried to corner the market.
Silver Demand
“There’s ample room for silver to extend its rally” because the metal is in demand for industrial uses as well as investment, Chris Yoo, head of global derivatives at Samsung Futures Inc. in Seoul, said today by phone. Silver is utilized in industrial products from chemical catalysts to ball bearings, according to the Washington-based Silver Institute.
“New applications for silver such as solar batteries may rise in earnest next year, propelling silver prices higher,” Yoo said.
Palladium for March delivery added 0.2 percent to $795 an ounce after reaching $798, the highest price since March 2001. Platinum for April delivery, recently up 0.2 percent at $1,764.60 an ounce, touched $1,776, the highest level since Nov. 10.
To contact the reporters on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net; Sungwoo Park in Seoul at spark47@bloomberg.net.
To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net.
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