Gold Climbs to 18-Month High as Dollar Weakens; Silver Gains
Gold surged to the highest price since March 2008 and a record close as the dollar extended its longest slide in six months, boosting demand for the metal as a hedge against inflation. Silver reached a 13-month high.
The U.S. Dollar Index, a six-currency gauge of the greenback’s value, has dropped for six consecutive sessions, the longest slump since March, to an 11-month low. Before declining today, crude-oil prices, used by some investors as a gauge of future inflation, jumped 61 percent this year. Gold, which tends to gain when the dollar weakens, has climbed 14 percent in 2009.
“The dollar is going down because of inflation fears” and that pushes gold up, said Leonard Kaplan, the president of Prospector Asset Management in Evanston, Illinois, and a bullion trader for more than three decades. “There is too much money and everything is going up. It’s not about supply and demand, it’s not about common sense.”
Gold futures for December delivery rose $9.60, or 1 percent, to $1,006.40 an ounce on the New York Mercantile Exchange’s Comex division, the highest closing price on record and the first above $1,000 since February. The advance brought this week’s gain to 1 percent. Gold has climbed for four straight weeks.
Earlier, the metal touched $1,013.70, the highest price for a most-active contract since March 17, 2008. On that date, gold reached a record $1,033.90 in New York.
“The continued weakness in the dollar gave the bulls incentive to push this higher,” Miguel Perez-Santalla, a Heraeus Precious Metals Management sales vice president in New York, said by e-mail. “It made new highs but once the dollar went back below 1.46 euros, it lost $4. All eyes are on the dollar at this moment for some guidance.”
Dollar Slump
The dollar index, which fell 2.1 percent in the previous five sessions, dropped 5.5 percent this year through yesterday. The index includes euros, yen, U.K. pounds, Canadian dollars, Swiss francs and Swedish krona.
Gold’s gains today were “strictly a dollar-inverse play,” said Jon Nadler, a Kitco Inc. senior analyst in Montreal. While the market is “overbought,” he said “speculators keep pushing.”
In London, bullion for immediate delivery rose $8, or 0.8 percent, to $1,004.60 an ounce at 7 p.m. local time. The spot price is up 14 percent for the year.
Gold’s gains may continue, “given concerns over rising inflation and our expectations for the dollar to weaken further,” Suki Cooper, an analyst at Barclays Capital in London, wrote in a report today.
Demand for gold through exchange-traded funds will rise to 700 metric tons this year, from 322 tons last year, Barclays said in the report. Gold assets in ETF Securities Ltd.’s exchange-traded commodities rose to a record, reaching almost 8.2 million ounces yesterday from 8.1 million on Sept. 9, the company said on its Web site today.
Silver Gains
In another Comex market, silver futures for December delivery rose 3 cents, or 0.2 percent, to $16.70 an ounce in New York. Earlier, the price reached $17.015, the highest for a most-active contract since Aug. 5, 2008.
Manufacturing demand for silver, including electronics and other industrial applications as well as jewelry and silverware, will rise 0.2 percent next year, the first increase in three years, according to Barclays.
“Silver has benefited from positive investment demand and a potential recovery in industrial demand” on signs of economic growth, Barclays said in today’s report.
Stockpiles of the metal in warehouses monitored by Comex dropped 16 percent in the past year while gold inventories increased 6.8 percent.
Among other precious metals, palladium futures for December delivery climbed $1.05, or 0.4 percent, to $294.50 an ounce on the Nymex. Platinum for October delivery gained $31, or 2.4 percent, to $1,320.70 an ounce in New York.
To contact the reporter on this story: Claudia Carpenter in London at ccarpenter2@bloomberg.net; Halia Pavliva in New York at hpavliva@bloomberg.net.
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