nflation and
debasement of currencies. The Dollar Index has lost 4.1
percent
this year. Gold typically moves inversely to the U.S.
currency.
“There’s not many good options for
investors to hedge
against a declining dollar and rising inflation,” Hwang Il
Doo,
head of trading with KEB Futures Co., said today from Seoul.
“Gold will rise to $1,100 an ounce by the end of the year,
once
physical demand from China and India adds fuel to the rally.”
Gold last traded at more than
$1,000 on Feb. 20, the first
time the metal had breached that price since March 2008.
Futures
then retreated to as low as $865 on April 6. The December
contract added 0.1 percent to $998.20 an ounce in New York at
10:53 a.m. in Singapore. Spot gold traded at $996.59.
The metal’s advance boosted
producers. Newcrest Mining Ltd.,
Australia’s largest gold-mining company, gained as much as 4
percent to A$33.86, and Lihir Gold Ltd., the second-largest,
increased 4.7 percent. Zijin Mining Group Co., China’s
largest
producer, rose 4 percent in Hong Kong.
Haven
Investment
Gold may be cementing its status as
a haven investment as
governments seek to flood the financial system with cash in
an
effort to haul the global economy out of a recession. The
record
for gold futures is $1,033.90 an ounce, reached March 17,
2008.
“The reasons to own gold as an
investment make sense,”
Sydney-based Greg Gibbs, a Royal Bank of Scotland Group Plc
strategist, said in advance of the metal’s gain to $1,000
today.
“It is a hedge against policy makers losing control of fiscal
and quantitative monetary policies.”
The Dollar Index, a six-currency
gauge of the dollar’s
value, declined for a third day today.
U.S. President Barack Obama has
increased U.S. marketable
debt to an unprecedented $6.78 trillion as he borrows to spur
the world’s largest economy. Goldman Sachs Group Inc.
predicts
that the U.S. will sell about $2.9 trillion of debt in the
two
years ending September 2010.
‘Hint of Hyperinflation’
“Money has been printed massively,”
said investor Jim
Slater, who was deputy chairman of Galahad Gold Plc before it
liquidated in 2008. “Inflation will follow fairly soon” and
there may be “a hint of hyperinflation. Even a hint will be
very good news for gold,” said Slater.
Crude-oil futures, used by some
investors as an inflation-
outlook guide, have soared 53 percent this year. Consumer
prices
will rise 0.9 percent in advanced economies next year
compared
with 0.1 percent in 2009, the International Monetary Fund
forecast in July. In other countries, prices may gain 4.6
percent in 2010, from 5.3 percent this year, the fund said.
Gold at more than $1,000 may
attract more investors seeking
to take advantage of the longest advance in the metal’s price
in
60 years. Assets in some of the industry’s largest exchange-
traded funds have reached all-time highs the past few months.
The SPDR Gold Trust, the biggest
ETF backed by the metal,
reached a record 1,134.03 metric tons on June 1. The fund,
which
held 1,077.63 tons as of Sept. 4, has overtaken Switzerland
as
the world’s sixth-largest gold holding.
Indian Demand
Investors bought 222.4 tons of
bullion in the second
quarter, 46 percent more than a year earlier, the World Gold
Council said in August. That’s less than 595.9 tons in the
first
quarter, when investment demand exceeded usage by jewelers
for
the first time since at least 2004.
The National Spot Exchange Ltd. in
India, the world’s
largest consumer, launched small-denomination contracts in
June
to lure households to trade physical gold. In China “ongoing
strength in demand” led by individual investors boosted sales
6
percent in the second quarter, the World Gold Council has
said.
“The market has the power to move
up further,” said
Ellison Chu, a metals manager with Standard Bank Asia Ltd.,
citing dollar weakness. Still, “the risk is that speculative
investors could be tempted to sell out,” said Chu.
Other precious metals have
outperformed gold this year.
Silver for immediate delivery gained 0.7 percent to $16.45 an
ounce today, the highest since August 2008. It has climbed 44
percent this year.
Platinum added 0.4 percent to
$1,265 an ounce, increasing
its gain this year to 35 percent. Palladium, the best
performing
precious metal this year, was 0.3 percent lower at $293.25 an
ounce. It has gained 57 percent in 2009.
“We are still skeptical that this
is a sustainable rally
and a comeback could be very painful,” Andrey Kryuchenkov, a
VTB Capital analyst in London, said before today’s advance in
gold. “Risk-averse buying is nowhere near the levels we saw
last winter.”
For Related News and Information:
Top commodity stories: CTOP <GO>
Top metals stories: METT <GO>
Most-read metals stories: MNI MET <GO>
U.S. Economic calendar: ECO US <GO>
World gold reserves: WGO <GO>
Gold lease rates: GLDL <GO>
Gold back testing: GOLDS <Cmdty> BTST <GO>
--With assistance from Glenys and Shamin Adam in Singapore,
Jesse Riseborough in Melbourne and Tan Hwee Ann in Hong Kong.
Editors: Jake Lloyd-Smith, Ravil Shirodkar
To contact the reporters on this story:
Kyoungwha Kim in Singapore at +65-6212-1895 or
Kkim19@bloomberg.net;
Nicholas Larkin in London at +44-20-7673-2069 or
nlarkin1@bloomberg.net;
Halia Pavliva in New York at +1-212-617-7221 or
hpavliva@bloomberg.net
To contact the editors responsible for this story:
James Poole at +65-6212-1551 or
jpoole4@bloomberg.net;
Stuart Wallace at +44-20-7673-2388 or
swallace6@bloomberg.net
