|
Gold highest in six months as dollar slides Original Source Link: (May no longer be active)
http://quote.bloomberg.com/apps/news?pid=10000081&sid=aZ5io0XBEi_0&refer=australiahttp://quote.bloomberg.com/apps/news?pid=10000081&sid=aZ5io0XBEi_0&refer=australia
Gold Prices Climb to Highest in Six Months as Dollar Slides
Oct. 20 (Bloomberg) -- Gold prices in New York rose to a six- month high as dollar slumped to an eight-month low, making the precious metal cheaper for buyers holding euros.
UBS AG, the world's largest foreign-exchange trader, cut its forecast for the dollar against the euro and said gold may climb to $430 an ounce in the next three months, up from $425 estimated previously. A slumping dollar helped push gold to a 15-year high to $433 on April 1.
``You can buy more gold with a cheap dollar,'' said Thomas Braddock, head trader at Nuwave Investment Corp. in Morristown, New Jersey. Nuwave has less than 5 percent of the $60 million it manages in gold futures. ``The dollar has been dragging, and when the dollar is lower, gold rallies.''
Gold futures for December delivery gained $3.20, or 0.8 percent, to $424.80 an ounce on the Comex division of the New York Mercantile Exchange after reaching $427.30, the highest for a most- active contract since April 2. A futures contract is an agreement to buy or sell a commodity at a specified price and date.
The dollar fell below $1.26 per euro for the first time since February. Concern about slowing international investment in the U.S. pushed the Dollar Index, a basket of six currencies, below 87 yesterday for the first time since February, and the index dropped again today. Gold rose in the past year, partly as the dollar fell against the euro, yen and other major currencies.
Yen Gains
``Not just the euro, but even the yen has taken out its recent highs'' against the dollar, Braddock said. The December gold contract may rise to the April 1 record of $436.50 an ounce in two weeks, he said.
Gold has moved almost in lockstep with the euro's trend against the dollar at a correlation coefficient of 0.74 in the past six months. The maximum reading is 1. The coefficient measures to what degree two variables move in unison.
``Strong physical demand, potentially smaller central bank selling of gold'' and increased demand from China will also support gold, UBS analyst John Reade said in a report.
Fabrication demand for gold increased by 6 percent in the first half, London-based researcher GFMS Ltd. said. Fabrication use this year may increase by almost 7 percent to a three-year high, driven by jewelry demand in India, GFMS said.
Investment demand also rose. Gold Bullion Securities Ltd. said in a report yesterday it sold 220,000 ounces more gold-backed shares on the London Stock Exchange, up 14 percent from three weeks ago. Each share is equivalent to a tenth of an ounce of gold.
``Volumes and assets under management have responded favorably to the recent rise in the gold price,'' Gold Bullion Securities said.
Gold Bullion shares rose 62 cents, or 1.5 percent, to $42.57 on the London Stock Exchange.
To contact the reporter on this story:
Choy Leng Yeong in Seattle at clyeong@bloomberg.net.
To contact the editor responsible for this story:
Steve Stroth at sstroth@bloomberg.net.
Last Updated: October 20, 2004 13:56 EDT
|
|
