Gold Rises from Lowest in a Month on Concern Dollar May Weaken

By Feiwen Rong

Oct. 17 (Bloomberg) -- Gold rose from its lowest in a month as the U.S. dollar headed for its first weekly decline against the euro since September, boosting the appeal of the precious metal as alternative asset.

The dollar fell on speculation reports today will show a deepening housing slowdown is eroding U.S. consumer confidence. The currency also fell against the British pound and the Swiss franc as traders increased their bets on a half-percentage point interest rate cut by the Federal Reserve on Oct. 29.

``Amid the volatile price action, gold is likely to act as a safe haven and provide relative stability,'' Barclays Capital analysts led by Kevin Norrish said in a report yesterday.

Bullion for immediate delivery advanced as much as $5.93, or 0.7 percent, to $810.53 an ounce and traded at $808.33 at 11:32 a.m. in Singapore. It slumped to $786.26 an ounce yesterday, the lowest since Sept. 17. Silver for immediate delivery gained 0.9 percent at $9.76 an ounce.

The dollar is headed for weekly losses against 9 of the 16 most-active currencies. A report later today will probably show U.S. housing starts slowed to an annual rate of 870,000 homes in September, the least since January 1991, according to a Bloomberg News survey of economists. The Commerce Department report is due at 8:30 a.m. in Washington.


Physical Demand

Volatile financial markets have resulted in a notable surge in retail investments in gold coins and bars, Barclays said.

Zuercher Kantonalbank, the Swiss lender that manages about $107 billion, said its gold vault is full after a surge in demand from investors seeking a haven during the credit crunch. The U.S. Mint halted supplies of certain coins due to surging demand, with sales of gold coins rising to levels not seen since 1999.

``There has been a swing from investors investing in gold in any form to investors specifically choosing to invest in physical gold,'' the Barclays analysts said. Open interest in Comex gold futures fell in the three weeks ended Oct. 7 and was at the lowest since August, 2007, according to Commodity Futures Trading Commission data.

December-delivery gold gained 0.7 percent to $810.40 an ounce in after-hours electronic trading on the Comex division of the New York Mercantile Exchange.

Gold for August delivery fell 2.1 percent to 2,633 yen a gram ($805 an ounce) on the Tokyo Commodity Exchange at the 11 a.m. local time break .

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