Gold Futures Rise for Longest Rally Since July; Platinum Gains

By Pham-Duy Nguyen

Nov. 25 (Bloomberg) -- Gold futures rose for a fifth straight session, the longest rally since July, as a decline in the dollar boosts the appeal of the precious metal as an alternative investment. Platinum also gained, and silver fell.

The dollar dropped for a third session against the euro after the Federal Reserve pledged $800 billion to help ease the credit crisis for homeowners, consumers and small businesses. Gold and most metals often move in the opposite direction of the U.S. currency. Before today, gold fell 2.1 percent this year as the dollar rallied 11 percent against the euro.

“With the flood of liquidity, that’s going to float the boats and sink the dollar,” said Ron Goodis, a retail trading director at Equidex Brokerage Group Inc. in Closter, New Jersey. “Commodities look set to stage a comeback on the dollar weakness. The real strength is likely to be in gold.”

Gold futures for February delivery rose 10 cents to $820.50 an ounce on the Comex division of the New York Mercantile Exchange, after earlier touching $834.50. The price climbed 12 percent since Nov. 18, the longest rally since the five days ended July 15.

Silver futures for March delivery fell 7.3 cents, or 0.7 percent, to $10.305 an ounce on the Comex, after earlier rising to $10.60. The metal rose 15 percent the previous two sessions.

Platinum futures for January delivery rose $5.20, or 0.6 percent, to $871.60 an ounce on the Nymex. Palladium for March delivery climbed 80 cents, or 0.4 percent, to $197.70 an ounce.

Dollar Drops

The dollar fell as much as 1.2 percent against the euro and 1.5 percent against a weighted basket of six major currencies.

Since the second quarter of 2007, banks worldwide have posted $971.2 billion in losses and writedowns related to the credit crunch. The U.S. has already committed $700 billion to help bail out banks. Fed policy makers have also lowered the benchmark interest rate to 1 percent from 5.25 percent in September 2007.

The dollar is “going to lose its status as the world’s reserve currency,” Jim Rogers, chairman of Rogers Holdings, said yesterday in a televised interview with Bloomberg News. “It will be devalued and it will go down a lot. These guys in Washington, they want to debase the currency.”

Still, gold’s gains were limited as some investors sold the metal after four straight days of gains. The metal earlier rose to the highest since Oct. 16.

Sell Signal

“Don’t be surprised that gold falls because it’s had a sharp rise the past few days,” said Marty McNeill, a trader at R.F. Lafferty Inc. in New York. “Once gold runs up, these hedge funds take advantage of the gain and sell for a profit.”

The seven-day relative strength index for gold has been above 70 for the past three days, a signal to technical traders that prices are headed lower.

“We are short of gold,” said Dennis Gartman, an economist and editor of the Suffolk, Virginia newsletter the Gartman Letter. “We shall always sell rallies such as these that retrace as classically as this market has.”

Gartman yesterday advised clients to begin selling gold, saying the metal’s recent gains were “nothing more than a rally in a bear market.”

Gold reached a record $1,033.90 on March 17 after Bear Stearns Cos. agreed to be purchased by JPMorgan Chase & Co. to avoid collapse. The metal dropped as low as $681 on Oct. 24 as the unfolding credit crisis forced some investors to sell the metal to raise cash and cover losses in other markets.

Before today, the Standard & Poor’s 500 Index has lost 42 percent this year.

To contact the reporter on this story: Pham-Duy Nguyen in Seattle at pnguyen@bloomberg.net.