Gold Heads for Fifth Weekly Gain as Dollar Drop Fuels Demand

By Kim Kyoungwha

Aug. 14 (Bloomberg) -- Gold climbed for a third day and headed for a fifth weekly advance as investors sought an alternative to a weakening dollar and commodities rose on signs of an economic turnaround.

Bullion is on course for the longest weekly winning streak since November 2007. The Dollar Index, a six-currency gauge of the greenback’s value, fell as much as 0.7 percent yesterday after the German economy, Europe’s largest, unexpectedly expanded in the second quarter. Hong Kong’s economy probably grew 1.2 percent last quarter from the previous three months, a Bloomberg survey showed.

“Investors are seeking shelter from a weakening dollar,” said Steve Chun, a trader with Hyundai Futures Co. in Seoul. “We expect physical demand for gold to rebound, with some gap of time, as global economies are recovering gradually.”

Gold for immediate delivery rose 0.2 percent to $956.47 an ounce at 2:03 p.m. in Singapore. The metal is up 8.4 percent this year and 0.2 percent this week. Crude oil for September delivery rose 0.5 percent to $70.89 a barrel.

Thirteen of 27 traders, investors and analysts surveyed by Bloomberg News, or 48 percent, said bullion would gain next week. Six forecast lower prices and eight were neutral.

There remains the risk of a gold price decline on the back of the liquidation of speculative long positions that are “at a high level at present,” Eugen Weinberg and other analysts with Commerzbank AG wrote in a note yesterday. “The prevalent dollar weakness is currently preventing this development,” they said. Long positions are bets that prices will gain.

Holdings in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, were unchanged at 1,065.49 metric tons as of Aug. 13, according to the company’s Web site.

Among other precious metals for immediate delivery, silver was up 0.3 percent at $15.075 an ounce, platinum rose 0.6 percent to $1,275.25 an ounce and palladium added 0.9 percent to $278.75.

To contact the reporter on this story: Kyoungwha Kim in Singapore at Kkim19@bloomberg.net