Gold Rises as the Dollar Falls Versus Euro, Crude Oil Advances

By Feiwen Rong and Glenys Sim

Aug. 27 (Bloomberg) -- Gold rose for the second day in Asia as the dollar's decline from a six-month high against the euro and crude oil's advance boosted the appeal of the precious metal as an alternative asset.

Gold is priced in dollars and often moves in the opposite direction to the U.S. currency, which fell for the first time in four days against the euro before a U.S. government report that economists forecast will show orders for durable goods stalled in July. Crude oil added more than $1 a barrel yesterday.

``Hurricane worries pushed crude oil prices higher, prompting buying of bullion that more than offset selling related to the U.S. dollar rally,'' Darren Heathcote, head of trading at Investec Bank Ltd.

Bullion for immediate delivery gained 0.3 percent to $827.22 an ounce at 2:15 p.m. in Singapore. Silver for immediate delivery advanced 0.4 percent to $13.6475 an ounce.

The dollar fell from a six-month high against the euro on speculation weakening business and consumer spending will discourage the Federal Reserve from raising interest rates.

The dollar declined to $1.4708 per euro from $1.4653 yesterday, when it touched $1.4571, the strongest since Feb. 14. Crude oil in New York rallied 0.3 percent to $116.65 a barrel after advancing 1 percent yesterday. Prices are up 61 percent from a year ago.

`Relief Rally'

Still, ``gold should fall, with last week's rebound looking like a relief rally before the onset of further declines,'' Mark Pervan, analyst at Australia and New Zealand Banking Group Ltd. in Melbourne, said in a report yesterday.

``The U.S. dollar appears to be climbing higher with the market looking for more reasons to buy rather than sell the previously unloved currency,'' he said, adding that ``a choppy oil price may limit price declines'' in bullion.

JPMorgan Securities Ltd., a unit of JPMorgan Chase & Co., lowered its price forecasts this year for gold and platinum, citing an improved outlook for the dollar and reduced inflation expectations.

Gold may average $884 an ounce in 2008, London-based analyst Michael Jansen said in a report today, down 3.3 percent from an earlier forecast of $914 an ounce.

Gold for December delivery gained 0.6 at $832.80 an ounce in after-hours electronic trading on the Comex division of the New York Mercantile Exchange at 2:12 p.m. in Singapore.

Bullion for December delivery on the Shanghai Futures Exchange jumped 1.4 percent at 184.80 yuan a gram ($839 an ounce).

In Japan, gold for June delivery on the Tokyo Commodity Exchange added 0.9 percent to 2,918 yen a gram ($832 an ounce).

To contact the reporters on this story: Feiwen Rong in Singapore at frong2@bloomberg.net; Glenys Sim in Singapore at gsim4@bloomberg.net