Gold Rises to Record for Third Day on Outlook for Weaker Dollar

By Kim Kyoungwha and Madelene Pearson

Oct. 8 (Bloomberg) -- Gold gained to a record for a third day driven by mounting concern that currencies including the dollar will lose value after governments boosted spending to combat the global recession, fueling demand for the metal.

The price will probably top $2,000 an ounce in the next decade, according to investor Jim Rogers. Bullion, which touched a high of $1,054.68 an ounce today, is heading for a ninth annual gain as the Dollar Index, a six-currency gauge of the dollar’s value, has shed 6.5 percent this year.

“People are printing money, gold is going up,” Rogers said in an interview on Bloomberg Television, adding that he may increase his holdings. “There are plenty of reasons to buy gold when the time is right,” Rogers said.

Gold for immediate delivery, which traded at $1,053.68 an ounce at 1:25 p.m. in Singapore, has risen 16 percent over the past year. Gold for December delivery in New York gained as much as 1.1 percent to $1,055.50 an ounce, also a record.

“It has moved higher on this safe-haven buying, a lot of it seems to do with fund activity, but there is definitely downside possibilities to gold ahead,” said Ben Westmore, an energy and minerals economist at National Australia Bank Ltd.

Newcrest Mining Ltd., Australia’s biggest gold-mining company closed at A$35.16 after earlier rising as much as 1 percent to A$35.50 on the Australian stock exchange. Lihir Gold Ltd. climbed 1 percent to A$3.17, while Avoca Resources Ltd. added 3.8 percent to A$1.66. PT Aneka Tambang, an Indonesian gold and nickel producer, advanced to its highest level in almost two months today, adding as much as 4.8 percent.

‘Smart People’

President Barack Obama has increased U.S. marketable debt to a record as he borrows to reignite growth in the world’s biggest economy. That’s boosted speculation the increased money supply will debase the currency, and may spur inflation. The printing of money and “abandonment of the dollar have taken the smart people over to precious metals,” according to Philip Gotthelf, president of Equidex Brokerage Group Inc.

Holdings in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, increased 8.8 metric tons to 1,109.31 tons as of Oct. 7, according to figures on the company’s Web site.

Surging gold prices are a signal that investors are buying metals to hedge against declining currencies, according to former Federal Reserve Chairman Alan Greenspan. The gains for commodities demonstrate a “move away from paper currencies,” Greenspan said last month.

To be sure, gold’s allure may decline as investors’ appetite for risk rises, said Westmore, the economist at National Australia Bank. The metal may also drop as there may not be “too much more downside” for the dollar, while inflation may not be a “big issue,” he said.

Among other precious metals, silver jumped to a 14-month high of $17.89 an ounce, platinum rose 0.9 percent to $1,339.25 an ounce and palladium added 0.6 percent to $314.75 an ounce.

To contact the reporters on this story: Kyoungwha Kim in Singapore at Kkim19@bloomberg.net; Madelene Pearson in Melbourne at mpearson1@bloomberg.net