Gold Rises After Biggest Weekly Slide in 25 Years Draws Buyers

By Pham-Duy Nguyen

Aug. 18 (Bloomberg) -- Gold rebounded on speculation investors and jewelers will purchase cheaper supplies of the metal after an 8.4 percent decline last week that erased all of this year's gains. Silver also rose.

The 14-day relative strength index of gold remained below 30 last week, a signal for some traders that the price is headed higher. Before today, gold had fallen 14 percent this month as the dollar rallied 6.2 percent against the euro and crude oil touched $111.34 a barrel, reducing the appeal of the precious metal as an alternative investment.

``Investors and jewelers will be coming in and taking advantage of the price,'' said Walter Otstott, a senior broker for Dallas Commodity Co. in Dallas. ``You're going to see a lot of people trading lightly and quick to get out at the first hint of adversity, but ultimately, gold will go higher.''

Gold futures for December delivery rose $9.40, or 1.2 percent, $801.50 an ounce at 9:21 a.m. on the Comex division of the New York Mercantile Exchange. Gold's decline last week was the biggest for a most-active contract since Feb. 25, 1983. The price has fallen 22 percent from a record $1,033.90 reached on March 17.

Silver futures for December delivery rose 19 cents, or 1.5 percent, to $13.12 an ounce on the Comex. Before today, silver had declined 13 percent this year while gold dropped 5.5 percent.

To contact the reporter on this story: Pham-Duy Nguyen in Seattle at pnguyen@bloomberg.net.