Gold Rises in Asia With Oil; Concerns Persist on U.S. Economy

By Feiwen Rong

July 21 (Bloomberg) -- Gold rose in Asia as oil's climb from six-week low renewed inflation concerns and signs of weakness in the U.S. economy prompted investors to buy the metal as an investment haven.

Crude oil rose on speculation diplomatic tensions with Iran may escalate after the world's fourth-largest oil producer resisted United Nations' demands that it suspend nuclear research. A Conference Board report today will probably show an index of leading economic indicators in the U.S., the world's largest economy, fell for the first time in five months.

``Investors' risk aversion may increase again, which is supportive for gold,'' Peter Fertig, consultant for Dresdner Kleinwort, said in a report on July 18. A recovery in oil prices may also assist gold, he said.

Bullion for immediate delivery rose 0.7 percent to $961.43 an ounce at 3:34 p.m. in Singapore. It fell 1 percent last week, the first decline since the week ended June 13. Silver advanced 0.6 percent to $18.2350 an ounce.

The Conference Board's June index probably fell 0.1 percent, according to a Bloomberg survey of 50 economists. A decline signals growth may slow during the next three to six months. Reports later in the week may also show U.S. home sales fell in June as the nation's housing slump heads into its third year.

Gold May Rally

Gold may rise this week as credit-market losses by financial firms spur demand for the precious metal as an alternative investment, according to a survey by Bloomberg News.

Fourteen of 25 traders, investors and analysts surveyed from Mumbai to Chicago on July 17 and July 18 advised buying gold. Six said to sell, and five were neutral.

Still, some of factors that have driven investor interest such as high oil prices, inflation concerns, weakness in equity markets and a volatile dollar could ``turn around somewhat'' by the end of 2008 or in the first half of 2009, David Moore, a commodity strategist at Commonwealth Bank of Australia Ltd., said today in an interview with Bloomberg Television.

``We expect the U.S. dollar to recover ground over the course of 2009 and as that occurs, we expect investor interest in gold to wane and gold prices to fall back certainly below $900 an ounce,'' Moore said.

Gold for August delivery rose 0.4 percent to $962.10 an ounce in after-hours electronic trading on Comex at 3:38 p.m. in Hong Kong, while gold for December delivery traded in Shanghai rose 0.3 percent to 211.94 yuan a gram ($965 an ounce).

Platinum for immediate delivery also rose today after tumbling 8.9 percent last week, the biggest weekly fall since the week ended March 21.

``Platinum has taken quite a beating,'' Adrian Koh, a gold dealer at Phillip Futures Pte. said today by phone from Singapore. ``We are currently nearing key support levels around $1,800 an ounce and these regions should hold well for the time being.''

Platinum gained 0.6 percent to trade at $1,864.25 an ounce at 3:41 p.m. in Singapore while palladium rose 0.8 percent to $420 an ounce.

To contact the reporter for this story: Feiwen Rong in Singapore at frong2@bloomberg.net