BLBG: Gold Gains a Second Day in London as Weaker Dollar Spurs Demand
Gold rose for a second day in London as a weaker dollar increased demand for the precious metal as an alternative investment.
The U.S. Dollar Index, a six-currency gauge of the greenback’s value, fell as much as 0.4 percent to a 12-day low on speculation the Federal Reserve will today signal it intends to refrain from raising interest rates this year. The index yesterday dropped the most in two weeks. Gold typically moves inversely to the U.S. currency.
“Dollar-watching has helped lift the metal” and “will provide direction in coming sessions,” James Moore, an analyst at TheBullionDesk.com in London, said today in a note. “With the Fed expected to suggest it will keep rates very low for some time, we expect investors may again turn to stronger-performing assets such as commodities.”
Bullion for immediate delivery added $3.30, or 0.4 percent, to $929.13 an ounce at 11:10 a.m. local time. August gold futures rose 0.6 percent to $929.40 an ounce on the New York Mercantile Exchange’s Comex division.
The metal rose to $928.75 in the morning “fixing” in London, used by some mining companies to sell production, from $920.75 at yesterday’s afternoon fixing.
The Fed will probably keep its interest-rate target for overnight loans between banks close to zero and maintain its $300 billion program of Treasury purchases, according to a Bloomberg News survey of economists.
SPDR Holdings
Investment in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, was unchanged at 1,131.24 metric tons as of yesterday, the company’s Web site showed.
Silver for immediate delivery in London rose 1 percent to $13.99 an ounce. Platinum gained 1.1 percent to $1,174.45 an ounce, and palladium was 0.6 percent higher at $238.10 an ounce.
Implied platinum stockpiles in the Swiss clearing system gained 112,000 ounces in May to the highest since March 2007, John Reade, head metals strategist at UBS AG in London, estimated in a report. The increase was mainly from imports from South Africa, the U.S., Japan and Germany, suggesting that industrial demand remains “very” weak, he said.
“The fact that metal is returning to the clearing center suggests that contractual undertakings are too high,” Reade said, adding that UBS doesn’t know the absolute stockpile level. “Producers are sitting with excess metal, as industrial clients do not wish to take the metal.”
Automakers account for about 60 percent of platinum and palladium usage, according to researcher and trader Johnson Matthey Plc. Moody’s Investors Service estimates that global auto sales will fall 13 percent this year, with the U.S. leading with a 24 percent drop.
Last month “we heard talk of auto companies looking to increase purchases of platinum-group metals following aggressive de-stocking that took place since mid-2008, but so far this has not translated into any measurable tightening of the platinum market,” Reade said.
