Gold Rises For First Day in Four on Increased Investment Demand

By Feiwen Rong

Nov. 4 (Bloomberg) -- Gold gained for the first time in four days on demand from investors who have lingering concern about the banking system and safety of their assets.

Governments led by the U.S. have added as much as $3 trillion in emergency funds to battle a collapse in trust among banks. Credit markets seized up in August 2007 after BNP Paribas SA halted withdrawals on three funds. The market froze after Lehman Brothers Holdings Inc. filed for bankruptcy on Sept. 15, prompting financial institutions to hoard cash.

``There's some physical demand from investors in Asia and Europe who are seeking to divert some of their assets into gold as they continue to worry about paper currencies and the banking system in general,'' Dick Poon, manager of the precious metals trading desk at Heraeus Ltd., said by phone from Hong Kong today.

Bullion for immediate delivery gained as much as 1.1 percent, or $8.15, to $731.60 an ounce today, before trading at $726.98 an ounce at 2:17 p.m. in Singapore. Silver for immediate delivery was little changed at $9.86 an ounce.

The European Central Bank and Bank of England will lower their benchmark interest rates by 50 basis points on Nov. 6, according to Bloomberg surveys. The Reserve Bank of Australia will also cut its overnight cash rate target by 50 basis points tomorrow, economists predict. India and China reduced borrowing costs in the past week.

Dollar Rally

A dollar rally against the euro and reduced safe-haven flows, has eased demand for gold, Mark Pervan and Natalie Robertson, analysts at Australia and New Zealand Banking Group Ltd., said in a report today.

The euro fell for a fourth day against the dollar to $1.2625 on speculation the European Central Bank will lower rates to cushion the impact of a slowing economy. The ECB may trim its benchmark rate by half a percentage point to 3.25 percent, according to a Bloomberg survey. Gold has dropped 17 percent in the last six months.

``We are in a historic period of forced liquidation where all positions must be reversed,'' Jim Rogers, chairman of Singapore- based Rogers Holdings, said in an e-mail to Bloomberg News. ``Gold and everything else are falling because of the forced liquidation without any regard to fundamentals.''

December-delivery gold was little changed at $726.90 an ounce in after-hours electronic trading on the Comex division of the New York Mercantile Exchange.

Gold for October delivery in Tokyo was up 0.6 percent at 2,312 yen a gram ($727 an ounce) at 3:15 p.m. local time.

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