Gold Rises in London as Dollar Weakens; Set for Quarterly Gain

By Nicholas Larkin

March 31 (Bloomberg) -- Gold rose in London, heading for its best quarter in a year, as a weaker dollar boosted demand for the metal as an alternative investment, and as some investors bought bullion after a two-day decline.

The dollar fell as much as 0.7 percent against the euro. Bullion, which yesterday traded at its lowest since March 18, and the dollar have returned to an inverse correlation in recent weeks after moving in tandem for most of 2009 as investors sought havens from bank failures and plunging stock prices.

“The euro is picking up against the dollar and that’s pushing gold higher,” Sagiv Peretz, a senior dealer at trading- system operator Finotec Trading U.K., said by phone from London. After two days of declines, “bargain hunters went back into the market. Demand for gold is still strong” as a hedge against future inflation, he said.

Bullion for immediate delivery rose $4.26, or 0.5 percent, to $920.10 an ounce by 9:30 a.m. local time. It’s up 4.3 percent this quarter. June futures added 0.7 percent to $923.80 an ounce in electronic trading on the New York Mercantile Exchange’s Comex division.

Gold has gained the past three months on concern that government stimulus packages will devalue the dollar and stoke inflation. Assets in the SPDR Gold Trust, the biggest exchange- traded fund backed by the metal, reached a record 1,127.44 metric tons on March 27, according to the latest figures on the company’s Web site.

Still, the metal is set for its first monthly decline since October, as higher prices deter jewelry buyers and equities climb. The MSCI World Index of shares advanced 6 percent this month while gold has dropped 2.4 percent.

Zero Buying

Gold imports by India, the world’s biggest buyer, was near “zero” this month, the Bombay Bullion Association Ltd. said today. The country, which imported 21 tons of gold in March last year, may resume imports in about two weeks as stockpiles and scrap supplies recede, the association’s vice president, Harmesh Arora, said.

Among other metals for immediate delivery in London, silver rose 0.9 percent to $13.15 an ounce. Platinum gained 1.1 percent to $1,130 an ounce, and palladium declined 0.6 percent to $215 an ounce.

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