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Silver up, 18.695, Gold 1149.20 Advances to One-Month High as Dollar’s Drop Spurs Demand

By Nicholas Larkin

Jan. 11 (Bloomberg) -- Gold rose to a one-month high in New York and London as a weaker dollar increased demand for the precious metal as an alternative investment. Platinum climbed to the highest price in 17 months.

The dollar fell the most against the euro since November, on speculation that the Federal Reserve will keep borrowing costs low for an extended period to revive growth. Gold rose 24 percent last year as the Fed kept interest rates near zero percent, sending the dollar down 4.2 percent against a basket of six major currencies.

“In an environment of low interest rates and recovering global growth, we expect precious metals to continue their upward trend this year,” Walter de Wet, a Standard Bank Ltd. analyst in London, said today in a report.

Gold futures for February delivery rose $12.50, or 1.1 percent, to $1,151.40 an ounce on the New York Mercantile Exchange’s Comex unit, the highest settlement price since Dec. 7. In London, gold for immediate delivery advanced $13.45, or 1.2 percent, to $1,151.70 an ounce at 8:24 p.m. local time.

Odds that the Fed will boost its target rate for overnight loans between banks in June or August decreased over the past month after employers unexpectedly eliminated jobs in December, according to futures data compiled by Bloomberg. The dollar fell as much as 1 percent against the euro.

Euro ‘Breakout’

“The technical breakout in the euro brought more buying into gold,” said Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago.

The benchmark U.S. interest rate was cut to between zero percent and 0.25 percent in December 2008. Central banks in Australia, Norway and Israel increased borrowing costs in recent weeks.

“Interest from investors has certainly been coming as a result of a declining dollar,” said Toby Hassall, a CWA Global Markets Pty commodity analyst in Sydney.

Among other precious metals, silver futures for March delivery rose 22.5 cents, or 1.2 percent, to $18.695 an ounce in New York. Platinum for April delivery gained $21.90, or 1.4 percent, to $1,592.50 an ounce, the highest closing price since Aug. 6, 2008. Palladium for March delivery increased $6.80, or 1.6 percent, to $431.95 an ounce.

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a3hOYLGyMNZI