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Gold (1139.90) Rises in New York
on Outlook for Dollar, Interest Rates

By Pham-Duy Nguyen

Jan. 6 (Bloomberg) -- Gold rose in New York to the highest price in almost three weeks on speculation that the dollar will slip, boosting the appeal of the metal as an alternative asset.

The dollar erased earlier gains against a basket of six major currencies after reports signaled the U.S. economic recovery may be slow, forcing the Federal Reserve to keep borrowing costs low for an extended period. Gold jumped 24 percent in 2009 as U.S. rates near zero percent sent the dollar down 2.4 percent against the euro.

“We’ve seen the data push the dollar down and gold jump,” said Tom Schweer, a senior market strategist at LaSalle Futures Group Inc. in Chicago. “With the Fed forced to keep rates low, the dollar will start to decline and that should allow gold to rally.”

Gold futures for February delivery climbed $17.80, or 1.6 percent, to $1,136.50 an ounce on the New York Mercantile Exchange’s Comex unit. Earlier, the most-active contract reached $1,138.40, the highest price since Dec. 17.

In London, gold for immediate delivery rose $18.50, or 1.7 percent, to $1,136.50 an ounce as of 7 p.m. local time.

The dollar, up as much as 0.5 percent against a basket of six major currencies earlier, erased the gain after the Institute for Supply Management said U.S. service industries expanded less than forecast in December. A separate report showed employers cut more jobs than estimated last month.

U.S. companies cut an estimated 84,000 jobs in December, the fewest since March 2008, Automatic Data Processing Inc.’s ADP Employer Services unit said. Economists in a Bloomberg News survey projected 75,000, the median of 31 estimates.

“The ADP numbers could signal a weaker dollar move later in the week,” said Michael Guido, the director of hedge-fund sales at Macquarie Capital USA Inc. in New York.

Silver futures for March delivery rose 37.5 cents, or 2.1 percent, to $18.175 an ounce in New York. The metal gained 49 percent last year.

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=apX7QZDPNiLg