Gold Gains for First Day in Four as Physical Demand, Oil Rise

By Feiwen Rong

Sept. 11 (Bloomberg) -- Gold gained for the first day in four as a dip to the lowest price in almost 11 months spurred demand from jewelers and as crude rose from a five-month low.

Bullion usually tracks crude as higher energy costs stoke investor demand for a hedge against inflation. Jewelry demand picks up during the festival season in the fourth quarter, said Ronald Leung, director at Lee Cheong Gold Dealers (Hong Kong) Ltd.

``Lower prices have attracted some physical buying this morning,'' Leung said today by phone from Hong Kong, adding that higher energy costs also helped stabilize the bullion market.


Bullion for immediate delivery rose 0.6 percent to $756.70 an ounce at 11:04 a.m. in Singapore after earlier falling to $749.40 an ounce, the lowest since Oct. 22, 2007. Silver for immediate delivery advanced 0.5 percent to $10.74 an ounce.

Demand rises in the fourth quarter as consumers in India, the world's biggest buyer, buy jewelry during the wedding season that runs from late September to December. Jewelers also buy the metal for Diwali, or the Festival of Light, while purchases also climb ahead of Christmas.

Still, the precious metal is under pressure as the U.S. dollar is strengthening against the euro, Leung said.

``If the dollar continues to firm, gold will resume its downtrend,'' he said.

The dollar rose to the highest in almost a year against the euro as the growth outlook in the world's largest oil consumer brightened after the recent slump crude prices. The U.S. currency rose to $1.3967 against euro after touching $1.3933, the strongest since Sept. 18, 2007.

Crude oil in New York jumped 1.3 percent to $103.95 a barrel at the same time. The contract is still down 30 percent from its all-time high at $147.27 on July 11.

December-delivery gold was down 0.3 percent at $760.30 an ounce in after-hours electronic trading on the Comex division of the New York Mercantile Exchange at 11:12 a.m. in Singapore.

Gold for December delivery traded in Shanghai fell 1.9 percent to 169.56 yuan a gram ($770 an ounce) at the same time.

In Japan, gold for August delivery on the Tokyo Commodity Exchange slumped 2.1 percent to 2,633 yen a gram ($762 an ounce).

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