BLBG: Gold Gains in London as Weaker Dollar, Higher Oil Boost Demand
By Nicholas Larkin
Dec. 8 (Bloomberg) -- Gold rose for the first time in four trading sessions in London as a weaker dollar and stronger oil prices increased bullion’s appeal as an alternative investment.
The dollar fell against the euro and pound as U.S. President-elect Barack Obama pledged the biggest public works program in about 50 years. Oil rebounded from six days of declines as OPEC said it may make a “significant” output reduction, while stock markets rallied on the U.S. stimulus plan.
“The euro is gaining against the dollar and that supports gold,” Gerry Schubert, a director at Fortis in London, said by telephone today. Gold’s gain is “all currency related and because of Obama.”
Gold for immediate delivery climbed $17.53, or 2.3 percent, to $773.98 an ounce by 8:50 a.m. in London. A close at that price would be the biggest daily gain in two weeks. February futures were $22, or 2.9 percent, higher at $774.20 in electronic trading on the Comex division of the New York Mercantile Exchange.
Crude oil gained as much as 6.4 percent to $43.40 a barrel and last traded at $43 in New York. Some investors buy gold as a hedge against inflation. The U.S. Dollar Index, which tracks the currency against six trading partners, slipped to the lowest in more than a week.
Stocks around the world rose after Obama said he’s planning the biggest public works program since President Dwight D. Eisenhower created the interstate highway system. Governments worldwide have introduced measures this year to buttress their economies from the worst financial crisis since the Great Depression as more than $31 trillion has been erased from the value of global equities.
Cues From Dollar
“Precious metals, gold in particular, have been taking cues not only from U.S. dollar movements, but also from global equity markets,” Walter de Wet, an analyst at Standard Bank Ltd. in Johannesburg, wrote today in a note.
Hedge-fund managers and other large speculators increased their net-long position in New York gold futures for the third week in the week ended Dec. 2, according to U.S. Commodity Futures Trading Commission data.
Speculative long positions, or bets prices will rise, outnumbered short positions by 84,369 contracts on the Comex division of the New York Mercantile Exchange, the Washington- based commission said in its Commitments of Traders report. Net- long positions rose by 2,497 contracts, or 3 percent, from a week earlier.
Among other metals for immediate delivery in London, silver rose 3.2 percent to $9.83 an ounce. Platinum climbed $30.50, or 3.8 percent, to $833.50 an ounce, and palladium was $12.75, or 7.8 percent, higher at $177.25.
Carmaker Bail Out
U.S. lawmakers may present details to Congress today on legislation to bail out ailing carmakers after reaching an agreement in principle with the Bush administration. Chief executives of General Motors Corp. and Chrysler LLC testified at hearings last week that they need a combined $14 billion to keep operating through March 31.
Automakers account for about a half of global platinum and palladium consumption, according to estimates by Johnson Matthey Plc, a London-based metals refiner, trader and researcher. The figures take recycling into account.
To contact the reporter on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net
