Gold Trades Little Changed on Weak Dollar, Near Record Oil

By Iris Leung and Feiwen Rong

July 15 (Bloomberg) -- Gold was little changed after reaching its highest in almost four months, on near record oil prices and as deepening losses at U.S. financial institutions caused the dollar to weaken against the yen.

Gold climbed to as high as $975.32 an ounce yesterday, the highest since March 19, on concerns that Israel may be preparing to attack Iran. Crude oil was steady as employees of Petroleo Brasileiro SA, Brazil's state oil company, began a strike in an area, home to more than 80 percent of the country's output.

``Gold prices are still much supported by three factors: the weak dollar, regional instability in the Middle East and the high oil prices,'' said Ellison Chu, manager of precious metals at Standard Bank Asia Ltd. ``It will be testing $995 an ounce in the short term.''

Bullion for immediate delivery traded 0.2 percent lower at $970.25 an ounce at 10:40 a.m. in Hong Kong. Silver lost 0.1 percent to $19.07 an ounce.

The dollar also traded near a two-week low against the yen on speculation losses at Fannie Mae and Freddie Mac will deepen. The currency fell to a 25-year low versus the Australian dollar.

New York crude oil futures traded at $144.78 a barrel in Hong Kong at 10:41 a.m., just below the record $147.27 reached on July 11. The dollar traded at 105.90 yen, down from 106.14 yesterday.

Wealth Creation

``Gold's drivers remain: falling mine production, competitive currency devaluations, wealth creation in India and China, and petrodollars,'' John Hill, analyst at Citigroup Global Markets Inc., said yesterday in a report. ``Gold has reasserted safe-haven status above $950 an ounce as the dollar dithers and oil retakes records near $150.''

Gold for August delivery lost 0.3 percent to $970.90 an ounce in after-hours electronic trading on Comex at 10:45 a.m. in Hong Kong. Gold for December delivery traded in Shanghai advanced for a fourth day, gaining 0.3 percent to 212.93 yuan a gram ($966 an ounce) at the same time.

Gold for June 2009 delivery rose 0.6 percent to 3,335 yen a gram ($979 an ounce) on the Tokyo Commodity Exchange.

To contact the reporters for this story: Iris Leung in Hong Kong at ileung7@bloomberg.net; Feiwen Rong in Singapore at frong2@bloomberg.net