Gold Advances in Asia on Crude Oil Rebound, U.S. Dollar Outlook

By Iris Leung

July 10 (Bloomberg) -- Gold advanced for the second day in Asia after crude oil gained boosting the appeal of the precious metal as an inflation hedge.

Gold also rose on expectations the dollar may fall against the euro for a second day, increasing the appeal of bullion as a haven. Oil rose as much as 0.9 percent today.

``Gold is often viewed as a hedge against inflation and exchange rate movements,'' Michael Widmer, an analyst at Lehman Brothers Holdings Inc., said in a report e-mailed today. ``Movements of oil prices are an important determinant of inflation.''

Bullion for immediate delivery climbed as much as $2.38, or 0.3 percent, to $930.95 an ounce, and stood at $929.80 at 9:57 a.m. in Hong Kong. Silver traded little changed at $18.1425 an ounce.

The dollar may extend declines against the euro and yen on speculation losses will deepen at Fannie Mae and Freddie Mac, the largest U.S. mortgage finance companies. It traded at $1.5724 per euro from $1.5743 yesterday, and was at 106.80 yen from 106.76 yen at 9:58 a.m. Hong Kong time.

``We believe that even if the dollar may strengthen, gold prices are set to increase as we move into the fourth quarter this year, on continued difficulties in the global economy and a problematic risk environment,'' said Widmer.

Gold for August delivery gained 0.3 percent to $930.80 an ounce in after-hours electronic trading on Comex at 9:59 a.m. Hong Kong time, while gold for December delivery traded in Shanghai gained 1 percent to 205.60 yuan a gram ($933 an ounce) at the same time.

Gold for June 2009 delivery fell 0.2 percent to 3,222 yen a gram ($938 an ounce) on the Tokyo Commodity Exchange at the 11 a.m. local time break.

To contact the reporter for this story: Iris Leung in Hong Kong at Ileung7@bloomberg.net