Gold Heads for Fourth Weekly Gain as Dollar’s Drop Fuels Demand

By Kim Kyoungwha

Sept. 11 (Bloomberg) -- Gold climbed above $1,000 an ounce for the third day this week, poised for a fourth weekly advance as a declining dollar bolsters demand for the precious metal as an alternative investment.

Bullion traded near the highest since March 2008 as deficit spending by governments around the world erodes the value of paper currencies relative to gold and commodities. Gold has risen 14 percent this year, while the Dollar Index, a six- currency gauge of the dollar’s value, shed 5.6 percent.

“Customers remain positive about the longer-term prospects for gold, but are concerned that following the recent run-up in gold that speculative positions are a little overblown,” John Reade, a strategist with UBS AG, wrote in a note.

Gold for immediate delivery rose as much as 0.7 percent to $1,003.10 an ounce, before trading at $1,001.20 at 2:33 p.m. in Singapore. The metal, which touched $1,007.70 an ounce on Sept. 8, the highest this year, closed last week at $994.40.

Holdings in the SPDR Gold Trust, the biggest exchange traded fund backed by bullion, were unchanged for a third day at 1,077.63 metric tons yesterday, according to figures on the company’s Web site.

To be sure, gold’s rally to more than $1,000 an ounce may not be sustainable, said Karen Jones, a technical analyst at Commerzbank AG, citing the metal’s relative strength index.

Gold’s relative strength index was above 70, a level that some investors and analysts use as an indication that prices are poised to fall.

Among other precious metals for immediate delivery, silver jumped 1.1 percent to $16.8450 an ounce, platinum added 0.4 percent to $1,288.75 an ounce and palladium added 0.7 percent to $293.50 an ounce.

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