Replies to post #6122 on Placer Gold Corp.(fka PGCR)

[GOLDMAN007]

Gold Rebounds on Demand for Haven Amid Recession; Silver Gains


By Pham-Duy Nguyen

Jan. 13 (Bloomberg) -- Gold prices rebounded on speculation that the recession will deepen, boosting the appeal of the precious metal as a store of value. Silver also gained.

The U.S. trade deficit in November narrowed the most in 12 years, a signal that world trade may contract as the economic slump worsens. Gold gained 5.5 percent last year as the Reuters/Jefferies CRB Index of 19 raw materials fell 36 percent and the Standard & Poor’s 500 Index dropped 38 percent.

“Gold is not as weak as some of the other commodities,” said Frank Lesh, a trader at FuturePath Trading LLC in Chicago. “Volatility in other markets and the geopolitical tensions are always supportive for gold. A good dip in prices is a buying opportunity.”

Gold futures for February delivery rose $6.40, or 0.8 percent, to $827.40 an ounce at 11:39 a.m. on the Comex division of the New York Mercantile Exchange. Earlier, the price touched $814, the lowest for a most-active contract since Dec. 12. The metal fell 4 percent yesterday.

Silver futures for March delivery rose 9 cents, or 0.8 percent, to $10.84 an ounce on the Comex. The metal declined 24 percent in 2008.

Investment in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, was little changed at 787.6 metric tons yesterday after reaching a record 787.9 tons on Jan. 6. Assets grew 24 percent last year.

Dollar Outlook

Still, gold’s gains may be limited should the dollar remain strong, Lesh said. The dollar gained as much as 1.4 percent against the euro today.

“Ultimately, the dollar is the driver,” Lesh said. “The dollar push is holding gold back. It looks like the ECB will be easing, and there won’t be anymore interest-rate reductions out of the U.S.”

The Federal Reserve’s benchmark interest rate in the U.S. is zero to 0.25 percent. The ECB’s main rate is at 2.5 percent.

Gold may also fall as the recession forces all asset prices lower, analysts said.

Disinflation may take away the “impetus to buy gold,” said Tom Pawlicki, a metals analyst at MF Global Ltd. in Chicago. There’s “pressure on the gold market offered by weak levels of physical demand, easing in credit-market tightness, a disinflationary environment, and from technical factors,” he said.

Dennis Gartman, an economist and editor of the Suffolk, Virginia-based Gartman Letter, advises buying gold should the metal rally above $890. UBS AG analyst John Reade said investors should look to purchase the metal below $800.