Gold Gains in London Trading on Weaker Dollar, Physical Demand

Gold gained for the first time in three days in London as a weaker dollar increased demand for the metal as an alternative investment.

The Bloomberg U.S. Dollar Index, which tracks the greenback against 10 currencies, fell as much as 0.2 percent. Data showed this week that China’s net gold imports from Hong Kong reached the second-highest level on record in October. The nation’s gold demand surged this year after supply rose and prices fell amid investor sales from bullion-backed exchange-traded products, Macquarie Group Ltd. said in a report today.

“Gold is mostly supported by a weaker dollar,” said Andrey Kryuchenkov, an analyst at VTB Capital in London. “Trading is very thin and narrow because of the U.S. holiday.”

Bullion for immediate delivery rose 0.5 percent to settle at $1,244.13 an ounce, after falling as much as 0.3 percent. Prices are down 5.9 percent this month, set for the biggest drop since June. Gold for February delivery added 0.5 percent to $1,244.50 an ounce in electronic trading on the Comex in New York. Futures trading volumes were 68 percent lower than the average for the past 100 days for this time of day, according to data compiled by Bloomberg.

U.S. markets are closed for the Thanksgiving holiday and today’s transactions will be booked with tomorrow’s trades for settlement purposes.

“Physical demand for gold is still improving,” Walter de Wet, head of commodities research at Standard Bank Group Ltd., wrote in a report today. “Volumes don’t seem big enough to stem the slide in the gold price. Should demand reach levels seen in June and July, it may start forcing short-covering in the futures market.”

U.S. Economy

Prices dropped to $1,225.55 on Nov. 25, the lowest since July 8. They slid 0.4 percent yesterday after data showed the number of Americans claiming jobless benefits in the week ended Nov. 23 declined to the fewest in two months and the Conference Board’s index of U.S. leading indicators rose for a fourth straight month in October. Separate reports also showed an unexpected advance in consumer sentiment, while orders for durable goods dropped.

Economic confidence in the euro-area rose more than economists forecast in November, while German unemployment unexpectedly rose for a fourth month, reports showed today. Holdings in the SPDR Gold Trust, the biggest ETP backed by bullion, declined to 843.21 metric tons yesterday, the least since January 2009, and have contracted 38 percent this year.

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