Gold Rises in N.Y. as Dollar Falls Against Euro; Silver Gains
By Pham-Duy Nguyen
May 5 (Bloomberg) -- Gold rose, rebounding from a third straight weekly loss, as the dollar weakened against the euro and oil shot to a record in New York. Silver also advanced.
The euro rose as much as 0.6 percent after sliding 1.3 percent against the U.S. currency last week. Gold climbed 27 percent in the past year, touching a record $1,033.90 an ounce on March 17. The euro gained 14 percent against the dollar, setting a record at $1.6019 on April 22. Oil futures jumped as much as 3.5 percent, passing $120 a barrel for the first time.
``The dollar weakness is making gold more attractive,'' said Frank Lesh, a trader at FuturePath Trading LLC in Chicago.
Gold futures for June delivery rose $16.10, or 1.9 percent, to $874.10 an ounce on the Comex division of the New York Mercantile Exchange. The metal dropped 2.4 percent in the past five sessions as the dollar rose 0.9 percent, diminishing the appeal of gold as a currency hedge.
Gold will average $906 this year, Citigroup Inc. analyst John Hill said in a report on May 1. Gold futures averaged $701 an ounce in 2007.
Silver futures for July delivery rose 36.5 cents, or 2.2 percent, to $16.83 an ounce. The price has jumped 13 percent this year, while gold has climbed 4.3 percent.
Gold also gained as higher energy costs boosted the appeal of the precious metal as a hedge against inflation. Crude-oil futures reached a record $120.36 a barrel in New York, surpassing the previous peak of $119.93 set on April 28.
``Gold's bounce was off of crude,'' said Frank McGhee, head metals trader at Integrated Brokerage Services LLC in Chicago.
Falling on Rate Outlook
Still, gold fell 6.1 percent last month, the most in four years, on speculation that the Federal Reserve may slow the pace of interest-rate cuts. The Fed lowered the benchmark bank- lending rate to 2 percent on April 30, the seventh reduction since September, and suggested it may not trim the rate again soon by backing away from a statement indicating a preference for more cuts.
Investment in the StreetTracks Gold Trust, the biggest exchange-traded fund backed by bullion, has dropped 13 percent to 580.4 metric tons from a record 663.8 tons on March 17.
Jewelers are the biggest buyers of gold, accounting for 61 percent of purchases last year, according to London-based researcher GFMS Ltd.
``It will be important for damped fabrication demand to recover before gold can move higher,'' Hill said. ``The key will be downside support from fabrication, probably three to five months out.''
To contact the reporter on this story: Pham-Duy Nguyen in Seattle at pnguyen@bloomberg.net.
Last Updated: May 5, 2008 14:46 EDT
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