Gold Gains as Declining Dollar, Equities Increase Haven Appeal

By Feiwen Rong

Nov. 20 (Bloomberg) -- Gold rose in Asia as a decline in the dollar and tumbling world equity markets increased its appeal as an alternative investment.

Bullion advanced after the dollar fell for the first day in three against the euro and U.S. stocks dropped to a five-year low on concern the U.S. recession is deepening. Investor buying may support gold against the general decline in commodity prices, the World Gold Council said.

``We've seen a pick-up in countries like India, China, Indonesia,'' Rozanna Wozniak, the council's investment research manager, said in a Bloomberg Television interview. ``I think a big factor underlying that has been that store of value, the safe haven motive.''

Bullion for immediate delivery gained $6.60, or 0.9 percent, to $741.15 an ounce before trading at $739.82 at 2:59 p.m. in Singapore. Silver for immediate delivery was up 0.6 percent at $9.3150 an ounce.

Gold has slumped 28 percent from its March record of $1,032.70 an ounce as gains by the dollar and slowing world growth reduced demand for commodities. Oil futures are down 50 percent, while copper is 54 percent lower.

Demand increased 18 percent in the third quarter as lower prices encouraged purchases by jewelers and as investors sought a haven, the gold council said.

So-called identifiable investment, which includes purchases through exchange-traded funds and of bars and coins, climbed 56 percent to 382.1 tons in the quarter. Jewelry demand gained 7.6 percent and sales to India, the largest gold consumer and jewelry buyer, advanced 29 percent.

Dollar Shadow

Still, gold is under pressure and ``has been shadowing the dollar,'' Walter de Wet, analyst at Standard Bank Group Ltd. in Johannesburg, said in a report today. ``Standard Bank maintains that the bias for the dollar is towards strengthening in the next three months, and erratically so.''

December-delivery gold rose 0.5 percent to $739.70 an ounce in after-hours electronic trading on the Comex division of the New York Mercantile Exchange. The contract gained 0.5 percent yesterday.

Gold for October delivery in Tokyo fell 2.1 percent to 2,256 yen a gram ($736 an ounce) at the 3:40 p.m. local time.

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