BLBG: Gold, Silver Rise as Sliding Dollar Revives Investment Demand
Gold rose as a weaker dollar revived demand for the precious metal as an alternative investment. Silver also gained.
The U.S. Dollar Index, a six-currency gauge of the greenback’s value, fell as much as 1.3 percent after yesterday rising the most in a week. Gold, which earlier slid to the lowest in six weeks, typically moves inversely to the dollar.
“The primary driver has been the rebound in the dollar,” Robin Bhar, an analyst at Credit Agricole SA’s Calyon investment-banking unit, said in a Bloomberg Radio interview today. “Gold can spike towards an all-time high this year and that would be because of the weaker trend in the U.S. dollar and ongoing stimulus measures.”
Gold futures for August delivery rose $3.30, or 0.4 percent, to $924.30 an ounce on the New York Mercantile Exchange’s Comex division. The contract earlier fell as much as 0.8 percent to the lowest since May 12.
Bullion for immediate delivery in London advanced $3.35, or 0.4 percent, to $926.05 an ounce at 7:25 p.m. local time.
Gold may reach $1,030 this year and $1,100 next year, Bhar said in the interview.
Silver futures for July delivery rose 14 cents, or 1 percent, to $13.845 an ounce in New York. Silver for immediate delivery rose 14.5 cents, or 1.1 percent, to $13.88 an ounce at 7:24 p.m. in London.
Inflation Outlook
“We do expect rising inflation expectations, which should be positive for commodities and particularly gold,” Bhar said in the interview. Government actions to stimulate economies, hold borrowing rates low and help banks improve liquidity will fuel concerns that prices may rise, he said.
The metal increased to $920.75 in the afternoon “fixing” in London, used by some mining companies to sell their output, from $920.25 in the morning fixing. London spot prices have declined in the past three weeks after four weeks of gains.
Federal Reserve policy makers began a two-day meeting today. The central bank has held its benchmark interest rate near zero since December.
Investment in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, slipped to 1,131.24 metric tons as of yesterday, the first decline in 11 sessions, according to figures on the company’s Web site.
The reduction in ETF holdings “is a signal that investors aren’t keen to hoard gold,” Pradeep Unni, an analyst at Richcomm Global Services in Dubai, said in a note.
