Gold Pares Decline as Dollar Falls Against Euro; Platinum Rises

By Claudia Carpenter

July 16 (Bloomberg) -- Gold rebounded in New York and London as the dollar’s decline may spur investor demand for precious metals as alternative investments. Platinum gained after a Goldman Sachs Group Inc. recommendation.

The U.S. currency, which tends to move inversely to bullion, fell 0.2 percent against the euro after earlier rising as much as 0.4 percent. Gold has added 6.8 percent this year in London, helped by investment demand for the metal, which exceeded usage by jewelers for the first time since at least 2004 in the first quarter, according to the World Gold Council.

“A further weakening in the dollar and/or a return to the fear-driven safe-haven buying seen at the start of 2009” is needed “for gold to move sharply higher,” John Reade, UBS AG’s head metals strategist in London, wrote in a report today. “Our own jewelry flows have been very light over the past two months.”

Bullion for August delivery was 0.1 percent lower at $938.60 an ounce by 8:23 a.m. on the New York Mercantile Exchange’s Comex unit, rebounding from a drop of as much as $5. Gold for immediate delivery fell 50 cents to $938.70 an ounce in London.

Reade plans to review his one-month gold forecast of $950 an ounce after tomorrow’s release of weekly so-called commitments of traders figures from the U.S. Commodity Futures Trading Commission, according to his report.

Goldman Forecast

ETF Securities Ltd. said gold assets in its exchange-traded commodities fell 0.3 percent yesterday to 7.57 million ounces, the lowest since June 1.

“Upside risk to gold remains limited from current levels,” Jeffrey Currie, an analyst at Goldman. in London, wrote in a report yesterday. The metal will end the year at $930 an ounce, the bank predicted.

Gold futures have gained in 2009 as the greenback has declined 2.5 percent as measured by the Dollar Index, which gauges the currency’s performance against six monies.

“In the short term, gold has re-established its relationship with the dollar,” Bradley George, head of global commodities and resources at Investec Asset Management Ltd., said yesterday. The metal probably will trade between $880 an ounce and $1,100 an ounce in the second half, he said.

Gold was unchanged at $935.25 an ounce in London’s morning “fixing,” the price used by some mining companies to sell their production, compared with yesterday’s afternoon fixing.

Platinum Supply

Goldman advised investors to buy platinum for January delivery on the New York Mercantile Exchange, saying increased automobile production “will likely expose South African supply problems again during the second half of 2009.” Carmakers account for about 60 percent of platinum and palladium use, according to metals refiner and trader Johnson Matthey Plc.

Platinum for January delivery climbed $8.50, or 0.7 percent, to $1,171.90 an ounce. The October contract, the most active futures, jumped 1.2 percent to $1,171.50.

Spot platinum rose to a record $2,301.50 an ounce in March 2008 as power shortages in South Africa, the largest producer, reduced output.

Silver futures for September delivery rose 27 cents to $13.235 an ounce. Palladium fell 0.4 percent to $247.50 an ounce. Palladium, up 31 percent this year, and platinum, ahead 24 percent, are used to make jewelry and auto catalysts that remove harmful vehicle emissions.

To contact the reporter on this story: Claudia Carpenter in London at ccarpenter2@bloomberg.net