Gold, Platinum Head for First Weekly Gain in Four on Inflation

By Glenys Sim

March 20 (Bloomberg) -- Gold and platinum dropped in Asia, paring the week’s gains, as some investors sold the metals to lock in profits following the recent rally on a weaker dollar and increased inflation concerns.

Both metals are set for their first weekly gain in a month on investors’ demand for a hedge against accelerating consumer prices after the Federal Reserve said it will buy as much as $1.15 trillion in bonds to cut borrowing costs. Gold is up 2.4 percent this week as the Dollar Index, which tracks the currency against those of six major U.S. trade partners, lost 4.9 percent.

“Gold has once again established its inverse relationship with the dollar, and will continue to extend gains as long as the dollar remains in its downtrend,” Steven Lv, trader at Shanghai Tonglian Futures Co., said from Shanghai.

Gold for immediate delivery fell 0.8 percent to $952.45 an ounce at 9 a.m. in Singapore after touching $961.51 yesterday, the highest since Feb. 27. Silver fell 0.5 percent to $13.525.

Assets in the SPDR Gold Trust, the biggest such fund backed by bullion, expanded to a record 1,103.29 metric tons yesterday, according to figures on the company’s Web site.

“We will continue to see people taking profit when there’s a big increase in prices, and then other people buying when they deem prices are low enough,” said Lv. Still, “it will take a lot more bad news, like consumer price indexes rising or equities tanking or the collapse of some major organization, for gold to break out of the $900 to $1,000 range.”

Debt Purchase

The Fed pledged March 18 to buy as much as $300 billion of Treasuries, up to $750 billion of bonds backed by government- controlled mortgage companies and $100 billion in debt from other state agencies to loosen credit and bolster the housing market. The dollar touched $1.3738 per euro yesterday, the lowest level since Jan. 9 and was at $1.3633 at 9:46 a.m.

Platinum lost 0.8 percent to $1,117 an ounce at 9:13 a.m., up 6.1 percent this week, as inflation concerns spurred demand for precious metals as a store of value. The metal rose as much as 6.7 percent to $1,130.50 yesterday, the highest since Sept. 26. Palladium added 0.6 percent to $207.50 an ounce. Both metals are used mainly in catalytic converters.

U.S. auto suppliers will get as much as $5 billion in U.S. Treasury aid to avoid a collapse that would cripple the domestic industry, including federally funded General Motors Corp. and Chrysler LLC. Suppliers will get a guarantee that money owed them for products will be paid, regardless of what happens to car companies, the Treasury Department said yesterday.

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