RTRS: PRECIOUS-Gold rises as dollar fall spurs investment buying
NEW YORK, June 2 (Reuters) - Gold rose on Tuesday, inching closer to $1,000 an ounce, as a weakening U.S. dollar prompted more investors to pile into bullion as a hedge against deterioration of dollar-denominated portfolios.
Inflation worries as a result of stimulus programs by governments and central banks around the world provided background support to gold, widely used as insurance against declining purchasing power.
"Earlier today we had a bit of a setback from yesterday's high and that brought some new buyers in, obviously helped by the weaker dollar," said Saxo Bank senior manager Ole Hansen.
"All this talk about systemic risk in the dollar and where you can hedge yourself against, that means commodities will be favored," he said.
U.S. August futures settled up $4.40 at $984.40 an ounce on the COMEX division of the New York Mercantile Exchange.
Spot gold was at $980.65 an ounce at 2:42 a.m. EDT (1842 GMT), against its late Monday quote $973.95 in New York.
The dollar fell further against the euro after U.S. pending home sales beat expectations to rise by 6.7 percent, boosting appetite for riskier assets. [ID:nL225850]
The dollar also fell to its lowest since mid-December against a basket of currencies on hopes the global economy may be on the road to recovery. U.S. stocks added to gains. [FRX/]
Gold and the dollar usually move in opposite directions, but that inverse inverse relationship broke down early this year as both assets benefited from a flight to safety.
Market watchers fear government efforts to pump liquidity into the financial system could cause a sharp rise in inflation once an economic recovery takes hold.
"Gold, when it does grab the attention of people, is a convenient way to protect against the upcoming inflation," said Axel Merk, portfolio manager of the Merk Hard and Asian Currency Funds.
ETFs RISE
Holdings of the world's largest gold and silver exchange traded funds, New York's SPDR Gold Trust and iShares Silver Trust , both rose on Monday. SPDR's holdings were up 15.27 tonnes at a record 1,134.03 tonnes. [GOL/SPDR]
Buying of gold ETFs, which issue securities backed by physical bullion, as a hedge against future risks such as inflation, has been a major source of demand in recent months.
Among other precious metals, silver was at $15.94 an ounce, up 2.3 percent from its previous finish of $15.59. Holdings of the iShares Silver Trust rose 260.36 tonnes on Monday.
Platinum group metals rose despite the anticipated dismal U.S. auto sales in May, with GM down 30 percent, Ford 24 percent lower, and Chrysler down 47 percent for the month.
Platinum was at $1,238.00 an ounce, up 2.4 percent from its late Monday quote of $1,208.50, while palladium was at $246 against its previous finish of $238.
