Gold Leads Gains in Precious Metals in London as Dollar Weakens

By Rachel Graham

Aug. 21 (Bloomberg) -- Gold rose to a one-week high in London as the dollar fell against the euro, buoying demand for the metal as an alternative investment. Platinum also advanced.

The relationship between gold and the euro-dollar exchange rate is strengthening, with a correlation of 0.7 so far this year, compared with 0.58 last year. A figure of 1 would mean the two moved in lockstep.

``The major effect on gold is coming from the weakening dollar,'' Liran Kapeluto, a senior dealer at trading-system operator Finotec Trading U.K. Ltd., said by phone from London. ``It is pushing commodities up.''

Gold for immediate delivery advanced $11.72, or 1.4 percent, to $825.40 an ounce as of 12:15 p.m. in London. The metal earlier reached $827.47, the highest since Aug. 14.

Gold futures for December climbed $14, or 1.7 percent, to $830.30 an ounce in after-hours electronic trading on the Comex division of the New York Mercantile Exchange.

Platinum, used in car exhaust systems, advanced for a second day, gaining as much as $28.50, or 2.1 percent, to $1,408 an ounce. It last traded at $1,407 an ounce, 39 percent below its March 4 record of $2,301.50.

Industrial demand for the metal is ``at best stable if not declining slightly,'' Wolfgang Wrzesniok-Rossbach, head of marketing and sales at Heraeus Metallhandels GmbH, said by phone from Hanau, Germany. Heraeus owns five precious metal refineries.

Demand for platinum will advance in the second week of September, when German car companies resume normal operations after summer vacations, Wrzesniok-Rossbach said.

Platinum has mostly dropped as investors withdrew money from exchanged-traded funds, he said.

ETF Securities Ltd., a provider of contracts tracking commodities, has said its physical platinum fund lost more investment last week than any other fund. ETFS Physical Platinum lost $72.5 million in the week to Aug. 15.

Among other metals for immediate delivery, silver rose 35 cents, or 2.6 percent, to $13.585 an ounce and palladium gained $4.50, or 1.6 percent, to $290 an ounce.

To contact the reporter on this story: Rachel Graham in London at rgraham13@bloomberg.net