Gold Advances on Decline in German Confidence, Weaker Dollar

By Nicholas Larkin

Nov. 24 (Bloomberg) -- Gold increased to a five-week high in London as German business confidence slumped and the dollar weakened, increasing the precious metal's appeal as a haven.

Germany's Ifo institute said today its business climate index dropped in November to the lowest since February 1993, a bigger drop than economists expected, while the dollar fell for the first time in three days against six major currencies. Gold, which generally moves in the opposite direction to the dollar, rose 7.9 percent last week, the biggest advance since Sept. 19.

``Short-term investors, such as hedge funds, may be coming back into the market after last week's gain,'' Mark O'Byrne, managing director of brokerage Gold and Silver Investments Ltd. in Dublin, said by phone. The German data ``won't do much for confidence.''

Gold for immediate delivery rose as much as $22.13, or 2.8 percent, to $822.53 an ounce and traded at $815.35 as of 12:48 p.m. in London. It earlier fell as much as 1.7 percent. December futures were $24.30, or 3.1 percent, higher at $816.10 in electronic trading on the Comex division of the New York Mercantile Exchange.

The metal climbed to $816.75 in the morning ``fixing'' in London used by some mining companies to sell production, from $774.50 at the previous afternoon fixing. That's the highest level since Oct. 16.

European stocks climbed after Citigroup Inc. received a government guarantee on $306 billion of assets to stabilize the bank after its shares plunged 60 percent last week. The bank will also get a $20 billion cash injection from the U.S. Treasury, adding to the $25 billion it received last month under the Troubled Asset Relief Program.

Recession in Britain

U.K. Prime Minister Gordon Brown will cut taxes and increase spending in a stimulus package that economists expect to total more than 15 billion pounds ($22 billion) as Britain slides into its first recession in 17 years.

The ICE futures exchange's U.S. Dollar Index lost 1.5 percent. Crude oil climbed as much as 4.3 percent to $52.09 a barrel in New York, raising bullion's appeal as an inflation hedge.

Gold has slipped 21 percent in London since reaching a record $1,032.70 an ounce in March as investors liquidated their commodity holdings to raise cash amidst the global credit crisis. ING Groep NV cut its 2009 gold forecast by 19 percent to $750 an ounce, in said in a Nov. 21 report. Platinum, silver and palladium estimates were also lowered.

``Credit markets thawing further could support precious metal investment sentiment, especially at current prices,'' Manqoba Madinane, a commodity analyst at Standard Bank Group Ltd. in Johannesburg, wrote in a note today.

Gold Survey

Gold in the SPDR Gold Trust, the largest exchange-traded fund backed by bullion, increased by more than 3 metric tons to 755.06 tons as of Nov. 21, according to data on the company's Web site. Switzerland's Zuercher Kantonalbank said gold holdings rose to a record 3.018 million ounces last week.

Eighteen of 40 traders, investors and analysts surveyed from Mumbai to Chicago on Nov. 20-21 advised selling gold this week. Seventeen said buy and five were neutral. A decline this week would be the first in four.

Among other metals for immediate delivery in London, silver gained 2.6 percent to $9.925 an ounce. Platinum rose $27.50, or 3.3 percent, to $854 an ounce and palladium was $9, or 4.9 percent, higher at $194.50 an ounce.

To contact the reporter on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net