Coins DIG

Gold rose to a record in London and New York as the dollar fell for a third day, spurring demand for the metal as a hedge against further weakness.

The Dollar Index, a six-currency gauge of the greenback’s performance, slipped as much as 0.3 percent to a 15-month low. Gold jumped 5.6 percent in the past month in London as the currency index lost 1.8 percent and as news last week of Indian and Sri Lankan government bullion purchases raised speculation that other countries would follow suit.

“The dollar has been weakening,” said Bernard Sin, head of currency and metals trading at bullion refiner MKS Finance SA in Geneva. “The market is also concerned about central banks’ interest in buying gold. We would not be surprised to see the market testing $1,200” an ounce by the end of the year.

Gold for immediate delivery rose as much as $11.53, or 1 percent, to $1,117.33 an ounce in London and traded at $1,115.84 by 9:30 a.m. local time. December gold futures gained for an eighth session on the New York Mercantile Exchange’s Comex division, climbing as much as 1.4 percent to $1,117.80 an ounce, and were last at $1,116.20.

“The real thing is what’s the value of paper money,” said John Hathaway, managing director at Tocqueville Asset Management LP and manager of the Tocqueville Gold Fund. “Frankly, it depends on what happens in the next three years to the efforts of the Federal Reserve and other world central banks to bring about an economic recovery.”

Inflation Hedge

Governments in the U.S. and other nations have cut interest rates and boosted spending to fight the worst recession since World War II, spurring some investors to buy bullion as a hedge against potential inflation and currency debasement.

“Would they be able to retract the liquidity they put into place?” Hathaway said in a Bloomberg Television interview today. “If they have a hard time doing it, I think we’ll see inflation and gold will go much higher.”

India’s central bank last month bought 200 metric tons of gold from the International Monetary Fund for $6.7 billion. That prompted analysts at Bank of America Merrill Lynch, Societe Generale SA and Barclays Capital to forecast further buying by central banks, the biggest owners of gold.

Holdings in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, were unchanged at 1,114.44 tons yesterday after climbing the most in a month on Nov. 9. Gold held in ETF Securities Ltd.’s exchange-traded products added 0.2 percent to 7.953 million ounces yesterday, its Web site showed.

Among other precious metals for immediate delivery in London, silver rose 1.3 percent to $17.575 an ounce. Platinum gained 1.2 percent to $1,368.25 an ounce, and palladium advanced 0.8 percent to $336.50 an ounce.

ETF Securities’ silver holdings rose 0.9 percent to a record 21.665 million ounces yesterday, its Web site showed. Platinum assets climbed 2.5 percent to 395,721 ounces.

Source: bloomberg.com