Gold Gains on Buying After Drop to Lowest Price in Six Weeks, Lower Dollar
Gold gained for the first time in three days in London as some investors bought the metal after its drop to a six-week low and as a weaker dollar spurred demand for an alternative asset.
The dollar was little changed after earlier today touching a three-week low versus the euro on speculation the European Central Bank will raise interest rates this week. European finance ministers on July 2 authorized an 8.7 billion-euro ($12.6 billion) loan payout to Greece by mid-July after the nation’s parliament passed austerity measures.
“The precious metal has benefited from a mix of bargain hunting and stronger euro,” said James Moore, an analyst at TheBullionDesk.com in London, in a report. “Trade today is likely to be relatively thin and choppy due to the U.S. holiday.”
Immediate-delivery gold gained $8.12, or 0.6 percent, to $1,495.90 an ounce by 5:33 p.m. in London. The metal dropped to $1,478.83 on July 1, the lowest level since May 17. Gold for August delivery was 0.9 percent higher at $1,496.10 an ounce on the Comex in New York. Floor trading will be closed today for the Independence Day holiday.
Bullion was little changed at $1,495 an ounce in the afternoon “fixing” in London, used by some mining companies to sell output, compared with $1,495.25 at this morning’s fixing.
The ECB on July 7 will increase its benchmark rate to 1.5 percent from 1.25 percent, according to economists surveyed by Bloomberg News. That may boost demand for the euro. Gold typically moves counter to the greenback.
Gold is up 5.3 percent in 2011 after climbing the past 10 years, the longest run of gains in at least nine decades. Europe’s debt crisis helped bullion reach a record $1,577.57 on May 2. Finance chiefs gather next week to discuss a long-term lifeline for Greece. A proposed debt rollover plan for Greece may still put the country in “effective default,” Standard & Poor’s said.
Hedge-fund managers and other large speculators reduced their net-long position in gold futures by 18 percent to 165,902 contracts in the week ended June 28, according to U.S. Commodity Futures Trading Commission data. That’s the biggest pullback since October 2008.
“Seasonal trends tend to be positive in the third quarter for gold and this current dip offers entry opportunities for gold once technicals hint at stabilization,” Stefan Graber, an analyst at Credit Suisse Group AG, wrote in a report today.
The metal is still “far away” from a mania and investors should own more gold, Ronald Stoeferle, a commodities analyst at Erste Group Bank AG, said today from Vienna on Bloomberg Television’s “The Pulse.” Gold will rise to $2,000 in 12 months, he said in a report e-mailed today.
“Every trend ends in euphoria and excess and that’s what’s going to lead us to $2,300 an ounce, which is the inflation- adjusted all-time high,” he said.
Silver for immediate delivery rose 0.7 percent to $34.125 an ounce in London. Palladium was little changed at $759.50 an ounce. Platinum was 0.1 percent higher at $1,722 an ounce.
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