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12-14-09 Monday, Gold May
Advance in New York as Weaker Dollar Spurs Demand

By Nicholas Larkin and Glenys Sim

Dec. 14 (Bloomberg) -- Gold, little changed in New York today, may rise as a weaker dollar spurs investors to buy bullion to hedge against further declines in the currency.

The U.S. Dollar Index, a measure against six counterparts, fell as much as 0.4 percent after Abu Dhabi pledged to bail out Dubai. Futures, which typically move inversely to the dollar, dropped to four-week low of $1,110.20 an ounce on Dec. 11, as the dollar climbed to a two-month high against the euro.

“We’re seeing weakness in the dollar,” Sagiv Perez, a senior dealer at Finotec Trading U.K. in London, said by phone. “There was such a big correction. Now people are looking for a reason to buy it back.”

Bullion futures for February delivery on the New York Mercantile Exchange’s Comex unit added $3, or 0.3 percent, to $1,122.90 an ounce at 8:27 a.m. local time. The metal dropped 4.2 percent last week. Gold for immediate delivery in London was 0.7 percent higher at $1,123.20.

“The performance of the dollar will continue to determine gold’s direction,” said Zhu Bin, president of futures research at Nanhua Futures Co., from Hangzhou, eastern China.

The metal slipped to $1,120 an ounce in the morning “fixing” in London, used by some mining companies to sell production, from $1,124 at the afternoon fixing on Dec. 11. Bullion futures have tumbled 8.5 percent from a record $1,227.50 on Dec. 3, while the Dollar Index advanced 2.5 percent.

Consolidation Ahead

“The dollar sentiment could be gradually improving and this would slow down much expected gains in early 2010,” Andrey Kryuchenkov, a VTB Capital analyst in London, said today in a report. “We shall see a prolonged period of consolidation here ahead of gradual gains at the start” of next year, he said.

The metal may advance to $1,500 by the middle of next year on concern that inflation will accelerate and on purchases by Asian central banks, Societe Generale said in a report today. Precious metals may rally “sharply” in the next two quarters, outpacing other commodities, the bank said. Macquarie Group Ltd. raised its forecast for gold next year by 14 percent to $1,150 as it increased commodity estimates citing higher demand.

Gold holdings in the SPDR Gold Trust, the biggest exchange- traded fund backed by the metal, were unchanged for a third day at 1,116.25 metric tons on Dec. 11, its Web site showed. They reached a record 1,134 tons on June 1.

Silver for March delivery in New York rose 0.9 percent to $17.235 an ounce. Platinum for January delivery added 1.3 percent to $1,440.80 an ounce, and palladium for March delivery was 7 percent higher at $364.50 an ounce.

Macquarie raised its 2010 silver forecast by 13 percent to $18, increased its platinum estimate by 14 percent to $1,413 and its palladium outlook by 8 percent to $338 an ounce, according to a report. The bank raised its rhodium forecast by 50 percent to $3,000 an ounce. The metal traded unchanged at $2,175 today, according to prices from Johnson Matthey Plc on Bloomberg.

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=atCV8a3Ws7S4