Gold Rises, Snapping 5-Day Drop, as Bank Woes Drive Dollar Down

By Kim Kyoungwha

Aug. 12 (Bloomberg) -- Gold advanced after U.S. stocks fell and the dollar depreciated on concern that bank earnings won’t improve in the second half.

Bullion snapped a five-day decline, the longest run of losses in five months, as the Dollar Index also fell on speculation the Federal Reserve will affirm its commitment to keeping interest rates low. The Standard & Poor’s 500 Index slid 1.3 percent in New York, driven by a slump in bank shares.

“The revival of bank woes in the U.S. weighed on both stocks and the dollar which is helping to fuel buying sentiment for gold and some commodities,” said Chris Yu, head of trading with Samsung Futures Co. in Seoul. “Gold will see a seesaw in prices until a clear direction over the mid-to-long term is set,” he said.

Gold for immediate delivery rose as much as 0.3 percent to $948.45 an ounce before trading at $947.35 at 9:09 a.m. in Singapore. The metal is up 7.4 percent this year.

The Dollar Index declined yesterday, snapping a three-day gain, as Fed Chairman Ben S. Bernanke and fellow policy makers started a two-day meeting to discuss interest rates and their asset purchase program.

Holdings in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, decreased 3.06 metric tons to 1,065.49 tons as of Aug. 11, according to figures on the company’s Web site.

Among other precious metals for immediate delivery, silver added 0.2 percent at $14.355 an ounce, platinum rose 0.6 percent to $1,245.75 an ounce and palladium added 0.7 percent to $275.50.

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