Gold Rises for Third Day in London on Higher Oil, Haven Buying

By Nicholas Larkin

Dec. 10 (Bloomberg) -- Gold rose for a third day in London as higher oil prices and a worsening global economic outlook increased the metal’s appeal as a safe haven and hedge against inflation. Platinum also advanced.

Crude oil gained as traders closed out bets prices will drop and on signs that OPEC will cut production twice in as many months. China’s exports fell for the first time in seven years, while Rio Tinto Group said it will eliminate 14,000 jobs and slash $5 billion in spending as the recession curbs demand.

“The oil price is up which is obviously positive for gold,” Mark O’Byrne, managing director of brokerage Gold and Silver Investments Ltd. in Dublin, said by phone. “Long-term concerns about the economic outlook are still leading more people to diversify.”

Gold for immediate delivery climbed as much as $17.08, or 2.2 percent, to $794.03 an ounce and traded at $788.33 by 1:03 p.m. in London. A close at that price would be the highest since Nov. 28. February futures jumped $15, or 1.9 percent, to $789.20 in electronic trading on the Comex division of the New York Mercantile Exchange.

The metal rose to $785.75 in the morning “fixing” in London used by some mining companies to sell production, from $767.75 at the afternoon fixing yesterday. Bullion has dropped 23 percent since reaching a record $1,032.70 an ounce in March as gains in the dollar and slowing world growth reduced demand for commodities.

Dollar Slips

Oil rose as much as 6.3 percent to $44.72 a barrel in New York. The U.S. Dollar Index, which tracks the currency against those of six trading partners, dropped as much as 0.5 percent, and was down 0.1 percent after brief gains in late morning. Bullion typically moves in the opposite direction to the dollar.

“If the dollar goes down, you tend to buy gold,” said Jesper Dannesboe, senior commodity strategist at Societe Generale in London, by phone today.

Highland Gold Mining Ltd. said it will delay commissioning its Novoshirokinskoye mine in Russia until next quarter, and defer construction and cut costs at other projects, because of a “dramatic” drop in metal prices.

“The market seems to be selling highs and buying dips because no-one is taking positions right now,” Walter de Wet, an analyst at Standard Bank Ltd. in Johannesburg, wrote in a note.

Among other metals for immediate delivery in London, silver added 1.4 percent to $9.985 an ounce. Platinum rose 2 percent to $829.50 an ounce, and palladium was 0.6 percent lower at $177.

Congress will vote as early as today on a plan Democrats reached with the Bush administration to keep U.S. automakers afloat while forcing them to restructure. General Motors Corp. and Chrysler LLC have said they need at least $14 billion in combined aid to keep operating through March 31.

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