Gold Rises for 2nd Day in London on Jewelry, Industrial Demand

By Chanyaporn Chanjaroen

Aug. 14 (Bloomberg) -- Gold rose for a second consecutive day in London, buoyed by demand from jewelers and industrial consumers. Platinum also advanced.

Gold is still trading below its 10-, 20- and 100-day moving averages after slumping to a seven-month low earlier this week. The drop in prices has spurred demand, said Wolfgang Wrzesniok- Rossbach, head of marketing and sales at refiner Heraeus Holding GmbH in Hanau, Germany.

``We have reports from our Asian colleagues that showed extremely good demand for jewelry and electronics,'' Wrzesniok- Rossbach said today by phone.

Gold for immediate delivery added $6.22, or 0.7 percent, to $832.95 an ounce as of 11:46 a.m. in London, after trading as high as $836.85. Prices are 19 percent below the record $1,032.70 reached March 17.

A two-day rally in oil prices has also buoyed gold, seen by some investors as a hedge against accelerating inflation, Wrzesniok-Rossbach said. Inflation in the euro region reached 4.1 percent in July, more than twice the limit of the European Central Bank.

The economy in the euro zone contracted in the second quarter for the first time since the introduction of the currency. Gross domestic product fell 0.2 percent from the first three months, the European Union statistics office in Luxembourg said today.

``The market might intensify speculation that the European Central Bank would cut rates soon,'' Peter Fertig, a consultant at Dresdner Kleinwort wrote today in a report. ``A shrinking interest rate spread over U.S. interest rates is negative for gold,'' he said.

U.S. Inflation

The U.S. inflation report due at 1:30 p.m. London time may move the dollar and gold, Emanuel Georgouras, a trader at Marex Financial Ltd. in London said by phone. Consumer price index probably climbed 0.4 percent in July, according to the median forecast of 78 economists in a Bloomberg News survey, after jumping 1.1 percent in June.

Dow Jones & Co. adjusted the weightings of 19 futures in the Dow Jones-AIG Commodity Index for 2009 and will increase gold's share to 7.86 percent, from 7.4 percent this year.

Silver for immediate delivery rose 3.0 cents to $14.940 an ounce. Platinum advanced $11, or 0.7 percent, to $1,525 an ounce and palladium fell $5.75, or 1.8 percent, to $319 an ounce.

To contact the reporter on this story: Chanyaporn Chanjaroen in London at cchanjaroen@bloomberg.net