Gold, Silver Climb as Dollar Falls Before Home, Price Reports

By Feiwen Rong

Aug. 18 (Bloomberg) -- Gold and silver climbed as the dollar snapped a three-day advance on speculation U.S. housing and inflation reports this week may limit the ability of the Federal Reserve to increase interest rates.

Gold has gained 21 percent in the past year and silver is up 12 percent as global inflation accelerated, the dollar slumped and the U.S. credit crisis spread to Europe. Still, a 5.6 percent rebound this month in the dollar against the euro drove gold to its lowest for almost 10 months on Aug. 15 and spurred the biggest daily decline in silver for two years.

``We saw some buying this morning from physical dealers or the general public,'' K C Wong, trader at Standard Bank Asia Ltd., said by phone from Singapore. ``The plunge last week was technically oversold.''

Gold for immediate delivery gained for the first day in three, rising as much as $11.25, or 1.4 percent, to $798.95 an ounce before trading at $796.33 at 10:54 a.m. in Singapore. The metal dropped as low as $772.98 Aug. 15, the lowest since October. Silver for immediate delivery jumped as much as 4 percent to $13.26 an ounce and traded at $13.1850.

Higher crude oil prices boosted gold. The fuel climbed for the first day in three in New York as Tropical Storm Fay near Cuba prompted evacuations from rigs and production platforms in the Gulf of Mexico. Oil for September delivery gained 0.7 percent to $114.54 a barrel at 10:58 a.m. in Singapore.

Housing, Inflation

U.S. housing starts probably dropped 9.9 percent to an annual rate of 960,000 in July, the fewest in 17 years, according to a Bloomberg News survey ahead of the Commerce Department report tomorrow. The Labor Department will tomorrow report the producer price index climbed 0.5 percent in July after jumping 1.8 percent in June, a separate survey showed.

The 14-day relative strength index for gold remained below 30 today, a signal that prices are headed higher. Gold's relative strength index fell to as low as 22 on Aug. 12 and remained below 30 throughout last week. The dollar traded at $1.4729 against the euro, down from $1.4688 Aug. 15.

Gold for December delivery was up 1.2 percent at $801.50 an ounce in after-hours electronic trading on the Comex division of the New York Mercantile Exchange at 11 a.m. in Singapore.

Bullion for December delivery on the Shanghai Futures Exchange rose 1.1 percent to 178.87 yuan a gram ($809 an ounce).

In Japan, gold for June delivery on the Tokyo Commodity Exchange gained 0.9 percent to 2,839 yen a gram ($801 an ounce) at 10:26 a.m. local time.

To contact the reporter on this story: Feiwen Rong in Singapore at frong2@bloomberg.net