BLBG: Gold Advances for Second Day After Drop, Higher Oil Spur Buying
By Glenys Sim
Oct. 21 (Bloomberg) -- Gold gained for a second day in Asia as the precious metal's decline to below $800 lured buyers and as crude oil advanced, boosting demand for an inflation hedge.
Bullion declined 7.8 percent last week, falling to the lowest in more than a month as the dollar's gain reduced the appeal of the precious metal.
``Inflation is still an issue, although people don't really talk about it these days as there are other things like the credit crisis to focus on,'' Lin Yuhui, research manager at China International Futures Co., said today from Shenzhen.
Gold for immediate delivery gained as much as 0.9 percent to $803.65 an ounce, and traded at $801.13 an ounce at 9:46 a.m. in Singapore, extending yesterday's 1.7 percent climb. Silver for immediate delivery was up 2.7 percent at $10.04 an ounce.
Crude oil climbed for a third day on signs that the Organization of Petroleum Exporting Countries will reduce production to halt a 50 percent drop in prices since July. Gold tends to rise in tandem with oil prices as investors seek a hedge against accelerating consumer prices.
Still, the dollar's recent rally may curb investment in gold. The dollar advanced for a fifth day against the euro after Federal Reserve Chairman Ben S. Bernanke endorsed additional fiscal stimulus to support the U.S. economy.
While the underlying level of support from physical demand looks ``relatively robust,'' the tensions in the market have favored the dollar, Frederic Lasserre, the global head of commodities research at Societe Generale SA in Paris, said late yesterday in a note.
``Sentiment remains very nervous towards gold at present,'' said Lasserre. ``The nature of last week's sell-off suggests that this represents a buying opportunity, but the market may not yet see it that way.''
Gold for December delivery rose 1.3 percent to $800.60 an ounce in after-hours electronic trading on the Comex division of the New York Mercantile Exchange.
-- Editors: Richard Dobson, James Poole
To contact the reporter on this story: Glenys Sim in Singapore at gsim4@bloomberg.net
