Gold Rallies After Declining by Most in Two Months on Dollar

By Jason Scott

June 4 (Bloomberg) -- Gold advanced, after dropping by the most in almost two months yesterday, as a decline in the dollar increased demand for the metal as an alternative investment.

Bullion rose as much as 0.6 percent as a recovery in the currency stalled. The U.S. Dollar Index, a six-currency gauge of the greenback’s value, closed up 1.4 percent yesterday, the biggest jump in more than four months. Gold typically moves in the opposite direction to the dollar.

“The U.S dollar has just dropped a little bit today but nothing too significant and the gold price has risen in reflection of that,” Jamie Spiteri, head dealer at Shaw Stockbroking Ltd. in Sydney, said in a phone interview today.

Gold for immediate delivery advanced 0.5 percent to $967.56 an ounce at 10:04 a.m. in Singapore, trading in a range between $961.92 and $968.80. The metal closed down 1.9 percent yesterday, the largest drop since April 6.

“I suspect that today it will hover at around that $965 level,” Spiteri said. “I can’t see it reaching $1,000 this week, but it’s not too far away,” he said.

Silver for immediate delivery increased 0.4 percent to $15.41 an ounce after tumbling 3.9 percent yesterday.

The dollar traded at $1.4172 per euro from $1.4162. The U.S. currency advanced for the first time in five sessions yesterday on speculation that an economic recovery will be too weak to sustain gains in higher-yielding assets such as equities, encouraging demand for safety. The U.S. Dollar Index fell as much as 0.3 percent today.

Outpacing Gold

Silver has outpaced gold this year. An ounce of gold now buys about 62.8 ounces of silver, according to data compiled by Bloomberg. This is down from a high of 84.4 on Oct. 10, which was the most since March 1995.

Investment in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, yesterday decreased 1.53 metric tons to 1,132.50 tons, dropping from a record 1,134.03 tons, the company’s Web site showed.

Gold for August delivery, the most-active contract on the Comex division of the New York Mercantile Exchange, was trading at $969.30. The contract reached $990.20 on June 1, the highest since Feb. 24.

Among other precious metals for immediate delivery, platinum fell 0.2 percent to $1,236.75 an ounce. Palladium, down 2.9 percent yesterday, fell 0.6 percent to $242 an ounce.

To contact the reporter on this story: Jason Scott in Perth at Jscott14@bloomberg.net