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Gold Fluctuates Near a Record on Concerns Rally May Be Overdone

Gold fluctuated near a record in London on concern that the metal’s advance as an alternative investment to a weakening dollar may have been overdone.

Gold reached a record $1,387.35 an ounce yesterday as the dollar weakened, boosting bullion holdings in exchange-traded products to an all-time high. Federal Reserve Chairman Ben S. Bernanke will speak on monetary policy objectives and tools in Boston today. Bullion’s rally has driven the relative strength index above 70, a sign to some analysts and traders who study technical charts that prices may be poised to drop.

“The dollar for the time being may go lower” and that will support gold, said Afshin Nabavi, a senior vice president at bullion refiner MKS Finance SA in Geneva. Still, gold “is overbought. For the market to remain healthy we need a correction, but any correction is an opportunity to buy.”

Immediate-delivery bullion lost $2.63, or 0.2 percent, to $1,378.53 an ounce at 11:22 a.m. in London. Prices swung between a gain of 0.1 percent and a loss of 0.4 percent. Gold for December delivery was 0.1 percent higher at $1,379.30 an ounce on the Comex in New York after yesterday reaching a record $1,388.10.

Bullion rose to $1,377.25 an ounce in the morning “fixing” in London, used by some mining companies to sell output, from $1,373.25 at yesterday’s afternoon fixing. Spot prices are up 2.4 percent this week, heading for a fifth weekly gain.

Winning Streak

Gold, up 26 percent this year, is heading for a 10th annual gain, the longest winning streak since at least 1920. Bullion has outperformed global equities, Treasuries and most industrial metals, prompting record investment in gold-backed exchange- traded products. The metal rallied as central banks and governments maintained low borrowing costs and spent trillions of dollars to stimulate economies.

Speculation that the Fed may further loosen monetary policy through so-called quantitative easing has helped to weaken the dollar, boosting gold. On Oct. 4, Bernanke said the central bank’s first round of large-scale asset purchases aided the economy and further buying is likely to help more. He’s scheduled to speak at 8:15 a.m. Boston time.

“Markets will watch for any hints on the timing and magnitude of additional quantitative easing,” said Stefan Graber, an analyst at Credit Suisse Group AG. “Expectations have been largely priced in,” Graber wrote in a report.

The dollar yesterday slipped to an eight-month low against the euro and the weakest level in 15 years versus the yen. Gold usually moves inversely to the greenback, which was lower against the yen and steady against the euro today.

Gold Survey

Gold may extend gains as real interest rates should remain low, according to Goldman Sachs Group Inc. That may “lend further support” to platinum, the bank’s analysts said in a report yesterday.

Fifteen of 19 traders, investors and analysts surveyed by Bloomberg, or 79 percent, said gold will gain next week. Three forecast lower prices and one was neutral.

Gold assets in ETPs climbed 19.77 metric tons to a record 2,104.65 tons yesterday, according to data compiled by Bloomberg from 10 providers. Holdings are up 17 percent this year. Silver assets rose 73.8 tons to 14,182.57 tons, the highest amount in at least eight months, data compiled by Bloomberg from four providers show.

Silver for immediate delivery in London was 0.3 percent lower at $24.57 an ounce after yesterday reaching $24.92, the highest level since March 1980. The metal is headed for an eighth weekly gain, the best run since May 2006.

Platinum’s Lure

Platinum declined 0.7 percent to $1,703.75 an ounce. Palladium lost 0.8 percent to $597.97 an ounce after yesterday reaching $605.13, the highest price since June 2001.

Platinum and palladium are more attractive than gold in the long term as the metals may benefit from wealth protection and increasing industrial demand, Commerzbank AG analysts including Eugen Weinberg said in a report today. While platinum may fall to $1,650 and palladium may drop to $525 in the fourth quarter on “profit-takings,” prices will climb to $1,800 and $600 at the end of next year, respectively, the bank said.

Citigroup Inc. raised its 2011 estimate for palladium by 28 percent to $575, and increased its 2011 forecast for platinum 2 percent to $1,625, it said in a report yesterday.

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