Gold Advances in Asia as Rising Crude Oil Provides Support

By Glenys Sim

Jan. 14 (Bloomberg) -- Gold rose in Asia as rising crude oil prices and a pause in the dollar’s rally added to the appeal of the precious metal as an inflation hedge and alternative investment. Platinum rose.

Bullion, down 3.3 percent this week, extended yesterday’s gain after Saudi Arabia said it will deepen oil production cuts next month to help restore prices. Gold fell to a one-month low of $814.66 an ounce yesterday as the dollar neared a five-week high against the euro on speculation European policymakers will be forced to cut interest rates when they meet tomorrow.

“Gold is a good inflation hedge,” Lars Kalbreier, global head of equities and alternatives research at Credit Suisse, said in a Bloomberg television interview today. “Inflation expectations are very low at the moment but down the road, with all the money that’s being thrown into the market, with all the money which is being printed by central banks, there will be an inflationary risk.”

Bullion for immediate delivery traded up 0.6 percent at $826.74 an ounce at 2:05 p.m. in Singapore, after gaining 0.1 percent yesterday. Gold for February delivery was 0.7 percent higher at $826.80 in after-hours electronic trading on the Comex division of the New York Mercantile Exchange.

“We also see the production levels have peaked awhile ago and hence the supply and demand picture will likely improve,” said Kalbreier.

The dollar fell from a five-week high against the euro on speculation a report today will show U.S. retail sales declined for a sixth month. The dollar weakened to $1.3303 versus the euro from $1.3182 late yesterday in New York, when it touched $1.3141, the strongest level since Dec. 11.

Platinum

Platinum for immediate delivery rose as much as 1.9 percent to $961.50 an ounce, as investors deemed the 5 percent decline in the past two days as excessive. The metal has fallen 40 percent in the past year on concern demand from carmakers may weaken further as their global sales plunge. Most platinum and palladium consumption is for catalytic converters to filter noxious gases from engine exhaust.

Ford Motor Co., the second-largest U.S. automaker, expects U.S. sales of cars and light trucks may fall as much as 9 percent this year from 2008, when they reached a 16-year low. PSA Peugeot Citroen, Europe’s second-biggest carmaker, reported sales dropped 8.7 percent last year.

Among other precious metals for immediate delivery, silver added 0.5 percent to $10.81 an ounce, and palladium rose 1.4 percent to $186.50 an ounce as of 2:07 p.m. in Singapore.

To contact the reporter on this story: Glenys Sim in Singapore at gsim4@bloomberg.net