Gold advances as alternatives lose appeal
by Bloomberg News
rose for the first day in four sessions on
speculation that a weaker US dollar will boost
demand for the precious metal as an alternative
investment. Silver climbed.
The US Federal Reserve bought $US7.5 billion
($10.7 billion) in government debt, its first
purchase of Treasury securities since the early
1960s, to ease credit markets. The US Dollar
Index, a six-currency gauge of the greenback's
strength, fell. Investment in the SPDR Gold
Trust, the biggest exchange-traded fund backed
by bullion, has risen 44% this year to a record
1,125 metric tons.
''The big picture is that they're putting more
liquidity into the system and that will
eventually weaken the dollar and help gold,''
said Frank McGhee, head dealer at Integrated
Brokerage Services LLC in Chicago.
Gold futures for June delivery rose $US12, or
1.3%, to $US938 an ounce on the Comex division
of the New York Mercantile Exchange. The metal
has gained 6.1% this year.
Silver futures for May delivery climbed 8 cents,
or 0.6%, to $US13.437 an ounce in New York. The
price has risen 19% this year.
The US dollar index, which includes the euro and
yen, fell as much as 0.8% before paring losses.
The gauge has dropped 5% this month. Gold's
gains may be limited should the US dollar's
decline stall, said Matt Zeman, a metals trader
at LaSalle Futures Group in Chicago.
''Without the (US) dollar cratering, gold
doesn't have the catalyst to move higher,''
Traders who sold gold yesterday on speculation
that US equities will extend this month's rally
were forced to buy back the precious metal after
the price rebounded, said Marty McNeill, a
trader at R.F. Lafferty Inc. in New York.
''You have to blame short-covering at this
point,'' McNeill said. ''Once gold turned
positive, all the boys on the floor jumped on
The metal fell 2.8% on Tuesday.
Gold may top a record set last year on a 21%
surge in investor demand this year, researcher
CPM Group said yesterday in an annual report.
Gold's all-time high was $US1,033.90, reached on
March 17, 2008.
Investment demand for gold will rise to a record
of 52.3 million ounces this year, topping 43.3
million ounces in 2008. Demand for gold to make
jewelry will drop 7.1% to 56.5 million ounces as
the recession curbs consumer spending, the group
''For gold to move materially higher, we
probably need to see investment demand
strengthen further and remain steady,'' said
John Reade, a UBS AG metals strategist in