Gold May Gain in London as a Weakening Dollar Increases Demand

By Nicholas Larkin and Kim Kyoungwha

Oct. 19 (Bloomberg) -- Gold, little changed in London today, may gain on speculation a weaker dollar will boost the metal’s appeal as an alternative investment.

The Dollar Index, a six-currency gauge of the greenback’s strength, fell as much as 0.2 percent today. Bullion has climbed 20 percent this year as investors sought to protect their wealth from the declining dollar and as a hedge against inflation. Gold prices, heading for a ninth annual gain, reached a record $1,070.80 an ounce on Oct. 14.

“It is still too premature to short gold,” Andrey Kryuchenkov, a VTB Capital analyst in London, said today in a report. “The dollar remains vulnerable and investor appetite for gold could re-emerge very quickly.”

Immediate-delivery bullion added $2.68, or 0.3 percent, to $1,056.28 an ounce at 9:31 a.m. local time. The metal added 0.4 percent last week, the eighth gain in nine weeks. December gold futures were 0.5 percent higher at $1,057.10 an ounce on the New York Mercantile Exchange’s Comex division.

Still, nine of 16 traders, investors and analysts surveyed by Bloomberg, or 56 percent, said bullion would fall this week. Five forecast higher prices and two were neutral.

“The whole market is expecting to see some consolidation first before another round of buying,” said Kate Harada, a senior trader with Mitsubishi Corp. Futures & Securities Ltd. in Tokyo.

ETF Gold Sale

Gold holdings in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, were unchanged for a seventh day at 1,109.31 metric tons on Oct. 16, according to the company’s Web site. Assets in ETF Securities Ltd.’s exchange-traded products fell 5.1 percent to 8.068 million ounces on Oct. 16, its Web site showed.

An investor who recently bought shares in one of the company’s gold products made a “one-off” transaction, Nicholas Brooks, head of research and investment at ETF Securities, said today by phone. He declined to name the investor.

Among other precious metals for immediate delivery in London, silver added 0.1 percent to $17.49 an ounce. Platinum rose 0.4 percent to $1,349 an ounce, while palladium lost 0.4 percent to $327.75 an ounce.

To contact the reporter on this story: Nicholas Larkin at nlarkin1@bloomberg.net; Kyoungwha Kim in Singapore at Kkim19@bloomberg.net