By Kim Kyoungwha
Oct. 7 (Bloomberg) -- Gold traded near its record and oil advanced for a third day as investors bought commodities to protect their wealth on speculation the dollar will extend its decline and inflation accelerate.
Gold for immediate delivery traded 0.5 percent below the record $1,043.78 yesterday as Asian stocks gained for a second day and the dollar was near the lowest level in almost two weeks against the euro. Australia unexpectedly increased interest rates yesterday on signs of strength in the economy.
The Reuters/Jefferies CRB Index of 19 raw materials rose 13 percent this year, rebounding from its worst year in a half century, led by robust demand from China. The Baltic Dry Index, regarded by some investors as a proxy for shifts in commodity demand, posted a fifth consecutive gain, the longest winning streak in almost a month.
“Eventually inflation will come; commodities always win in inflation,” said Ghee Peh, head of Asian mining research with UBS Securities Asia Ltd. in Hong Kong. “We’re going to have a weak dollar until the U.S. economy sorts out its problem.”
Gold for immediate delivery traded at $1,038.50 an ounce at 11:51 a.m. in Singapore compared to yesterday’s record of $1,043.78. Crude oil for November delivery rose 63 cents, or 0.9 percent, to $71.51 a barrel, in electronic trading on the New York Mercantile Exchange.
The dollar is coming under pressure as speculation that the Federal Reserve will trail other central banks in raising interest rates made the greenback less attractive. The dollar traded at $1.4704 per euro at 2:53 p.m. Sydney time from $1.4722 yesterday.
Inflation Concern
Gold has risen 18 percent this year as governments boost spending to pull their economies out of recession, sparking speculation rising money supply will debase paper currencies.
“The uptrend remains intact given that rate hikes to come show inflation will build up, fanning demand for gold,” said Kim Jae Jun, a trader at Eugene Investment & Futures Co. in Seoul. Today’s move was a “minor consolidation,” and gold will rise to $1,100 an ounce by the end of 2009, Kim said.
Newcrest Mining Ltd., Australia’s biggest gold-mining company, paced producers’ gains, rising as much as 7.5 percent to A$35.40 on the Australian stock exchange. Lihir Gold Ltd. added as much as 6.1 percent to A$3.15.
“There’s talk of inflation re-emerging and continuing weakness in the U.S. dollar, which suggests the gold price may well continue to climb higher,” said William Seddon, who helps manage about $300 million at White Funds Management in Sydney.
Oil Gains
Crude-oil futures, used by some investors to forecast trends in inflation, have soared 60 percent in New York this year. The “fragility of the U.S. dollar” was also supportive of the oil price, said David Moore, commodity strategist at Commonwealth Bank of Australia in Sydney.
Among other commodities, three-month delivery copper fell 0.4 percent to $6,088 a metric ton on the London Metal Exchange. Corn for December delivery fell 0.2 percent to $3.575 a bushel in electronic trading on the Chicago Board of Trade, a day after gaining the most in three weeks to a two-month high.
To contact the reporter on this story: Kyoungwha Kim in Singapore at Kkim19@bloomberg.net
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