Gold Jumps From One-Month Low as Dollar Weakens Before Speech

By Feiwen Rong

Oct. 20 (Bloomberg) -- Gold climbed from its lowest level in about a month as a weakening dollar boosted the appeal of the precious metal as an alternative asset.

The dollar declined toward the lowest in a week against the yen and slid for the first time in four days versus the euro on concern U.S. Federal Reserve Chairman Ben S. Bernanke will forecast a prolonged downturn for the world's largest economy when he speaks today.

Gold bullion gained because of ``some weakening in the U.S. dollar this morning,'' Darren Heathcote, head of trading at Investec Bank Ltd., said by phone from Sydney. ``The U.S. had some particularly bad news coming out on Friday'' which indicated the country may be headed for a recession.

Bullion for immediate delivery advanced as much 3.4 percent to $810.02 an ounce and traded at $807.43 at 2:58 p.m. in Singapore. It slumped to $773.72 an ounce on Oct. 17, the lowest since Sept. 17. Silver for immediate delivery jumped 5 percent to $9.84 an ounce.

Confidence among Americans fell by the most on record and single-family housing starts hit a 26-year low, reports showed on Friday, posing an increasing threat to consumer spending that accounts for more than two-thirds of the economy.

``There's still some upward pressure on gold as a result of its potential as a relatively safe-haven investment,'' Heathcote said. Bernanke will testify at the House Budget Committee on the economic outlook and financial markets at 10 a.m. in Washington.

Long Positions


Still, recent data from the U.S. Commodity Futures Trading Commission showed that hedge-fund managers and other large speculators cut their net-long positions in New York gold futures in the week ended Oct. 14.

Some of the reduction ``might be coupled with the need to pay margin calls amid the uproar in the financial markets,'' Heathcote said. ``Some investors may start to think gold's not as safe as they expected because of the wild swings in prices'' recently, he said.

Speculative long positions, or bets prices will rise, outnumbered short positions by 106,825 contracts on the Comex division of the New York Mercantile Exchange. Net-long positions fell by 4,788 contracts, or 4 percent, from a week earlier.

Gold in the SPDR Gold Trust, the largest exchange-traded fund backed by bullion, dropped 1.4 percent. The holdings fell 10.72 metric tons to 756.86 tons on Oct. 16, according to figures posted on the company's Web site.

Hong Kong Futures

Gold futures on the Hong Kong Futures Exchange debut today with three contracts for delivery in October, November and December. The October futures, the most active, traded at $806.1 an ounce at 2:07 p.m. local time.

December-delivery gold gained 2.6 percent to $808.50 an ounce in after-hours electronic trading on the Comex division of the New York Mercantile Exchange. Gold for December delivery in Shanghai rose 0.3 percent to 176.25 yuan a gram ($803 an ounce).

Gold for August delivery advanced 1.4 percent to 2,641 yen a gram ($804 an ounce) on the Tokyo Commodity Exchange at 3:10 p.m. local time.

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