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Gold may rise on weaker dollar outlook   2009-05-02 - Bloomberg

Gold may rebound next week on speculation the dollar will weaken after the Federal Reserve said it would continue buying back US government debt.


Nineteen of 32 traders, investors and analysts surveyed by Bloomberg News, or 59 percent, said gold would climb. Six people forecast lower prices, and seven were neutral.

Gold for delivery in June has dropped 3.1 percent this week to US$885.80 an ounce in New York trading.

“The Fed is putting the dollar at risk to try saving the banks by trying to pump up the economy,” James Turk, founder of, wrote in an e-mail. “Inflation, and higher gold prices, will be the result.”

The Fed kept the target range for the federal funds rate unchanged at between zero and 0.25 percent on April 29. The central bank is trying to revive growth by funding the purchase of $1 trillion in asset-backed securities and by directly buying as much as $300 billion of long-term Treasuries and $1.45 trillion in mortgage debt, known as quantitative easing.

Gold extends decline as equities rally

Gold fell for a second day as rising equity markets added to signs of improvement in the world economy and reduced the investment appeal of the metal.

European stocks posted a record monthly gain on Thursday, and the Standard & Poor’s 500 Index completed its best monthly performance in nine years.

Oil prices, monitored by investors buying gold as an inflation hedge, fell 0.4 percent Friday and are headed for their third weekly decline in four.

“There was a time when we saw a safe-haven bid for gold and that is clearly not as strong as it was,” David Moore, commodity strategist at Commonwealth Bank of Australia Ltd., said from Sydney. “Without that safe-haven investment, the overall demand for gold is diminishing.”

Bullion for immediate delivery fell as much as US$2.05, or 0.2 percent, to $886.15 an ounce. It traded at $886.75 at 9:20 a.m. in Sydney, taking its loss for the week to 2.9 percent.

Bullion has dropped from a three-week high of $918.55 on April 27. The metal fell 3.4 percent last month as the S&P 500 gained 9.4 percent, Europe’s Dow Jones Stoxx 600 index climbed 13 percent and the MSCI Asia Pacific Index jumped 12 percent.

Investment demand drops

Investment demand, the biggest driver of gold prices over the past 18 months, is waning amid stronger equity markets and signs that industrial production may have bottomed, Moore said.

While demand from jewelry makers, the biggest users, has improved, it remains “tepid,” he said.

Holdings in the SPDR Gold Trust, the biggest exchange-traded fund backed by bullion, were at 1,104.45 metric tons on Thursday, unchanged for a fifth day.

Gold for June delivery fell $3.90, or 0.4 percent, to $887.30 an ounce at the Comex division of the New York Mercantile Exchange. The contract fell 1 percent to $891.20 on Thursday, taking its loss for April to 3.7 percent.

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