Gold Rises for 4th Day in London as Weaker Dollar Lifts Demand

By Nicholas Larkin

Dec. 11 (Bloomberg) -- Gold rose for a fourth day in London as the dollar weakened, increasing the metal’s appeal as an alternative investment to the U.S. currency. Silver and platinum also gained.

The dollar fell to a seven-week low against the euro as a bill designed to prevent the collapse of U.S. automakers met with opposition in the Senate. Bullion, which typically moves in the opposite direction to the dollar, yesterday gained the most in more than two weeks.

“If the U.S. dollar continues its slide, the only way is up” for gold, Emanuel Georgouras, a precious metals trader at Marex Financial Ltd. in London, wrote today in a note. Still, “it is hard to expect gold to continue its northward journey without some decent profit taking along the way.”

Gold for immediate delivery climbed as much as $13.81, or 1.7 percent, to $824.41 an ounce and traded at $821.47 by 11:06 a.m. in London. February futures gained $13.50, or 1.7 percent, to $822.30 in electronic trading on the Comex division of the New York Mercantile Exchange.

The metal, heading for its biggest weekly gain since September, rose to $821 in the morning “fixing” in London used by some mining companies to sell production, from $802.25 at the afternoon fixing yesterday. Bullion has dropped 20 percent from its March record of $1,032.70 an ounce as gains in the dollar and slowing world growth reduced demand for commodities. Gold is down 1.5 percent this year.

U.S. reports later today will show the country’s trade deficit probably narrowed in October to the lowest in three years, while more than half a million workers last week sought jobless benefits for the first time, according to Bloomberg surveys of economists.

‘Hard Assets’

“Hard times are as usual leading investors to prefer hard assets and there is no harder asset than the tangible finite currency that is gold,” said Mark O’Byrne, managing director of brokerage Gold and Silver Investments Ltd. in Dublin.

The U.S. Dollar Index, which tracks the currency against those of six trading partners, slipped 1 percent. Gold may also have been helped higher as crude oil advanced 4.7 percent to $45.55 a barrel in New York. Some investors buy gold as a hedge against inflation.

Gold may reach $1,000 an ounce next year and “I think you’re going to see the $2,000 level in 2010,” as the global economy heads for a bigger slump than currently forecast, said Philip Manduca, head of investments at ECU Group Plc.

“The world economy has got to get worse before it gets better,” London-based Manduca, who manages more than $1 billion, said in an interview. Investors should “go to cash, buy gold,” as stock markets drop further, he said.

Platinum Gains

Among other metals for immediate delivery in London, silver rose 1.7 percent to $10.41 an ounce. Platinum gained $10.05, or 1.2 percent, to $842.05 an ounce, and palladium was 0.8 percent higher at $182.75.

U.S. Democratic leaders and the administration of George W. Bush are trying to beat a deadline to bail out General Motors Corp. and Chrysler LLC before the companies burn through their remaining cash and are forced to declare bankruptcy.

Automakers account for about a half of global platinum and palladium consumption, according to estimates by Johnson Matthey Plc, a London-based metals refiner, trader and researcher. The figures take recycling into account.

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