Gold Gains Most in a Week as Halt in Dollar Rally Spurs Demand

By Nicholas Larkin and Kim Kyoungwha

Feb. 8 (Bloomberg) -- Gold gained the most in a week as a halt in the dollar’s rally may increase demand for the metal as an alternative investment.

The U.S. Dollar Index, a six-currency gauge of the greenback’s strength, fell as much as 0.4 percent after last week climbing to the highest level in almost seven months. Gold futures, which usually move inversely to the dollar, slid 5.8 percent in three sessions to a three-month low on Feb. 5.

“The dollar is down,” said Peter Fertig, the owner of Quantitative Commodity Research Ltd. in Hainburg, Germany. The metal’s sudden drop last week is also “a good indicator that prices may rise,” he said.

Gold futures for April delivery rose $13.40, or 1.3 percent, to $1,066.20 an ounce on the New York Mercantile Exchange’s Comex unit. That marks the biggest gain since Feb. 1. Futures declined 2.9 percent last week, a fourth straight drop.

In London, gold for immediate delivery fell 48 cents to $1,065.82 at 7:46 p.m. local time.

Gold futures’ relative strength index, a gauge of whether a commodity or security is overbought or oversold, plunged to 40.32 from 50.08 on Feb. 3. “From a technical perspective, gold was heavily oversold,” Fertig said.

Lunar New Year

Physical buying may also support prices before China’s weeklong Lunar New Year holidays start on Feb. 14, London-based broker ODL Securities Ltd. said today in a report.

The dollar index had a third consecutive weekly gain last week as the euro fell on concern that nations such as Greece may struggle to close budget deficits. European finance ministers said at the weekend they will help ensure that Greece tackles its deficit.

“While gold’s longer-term investment credentials remain sound, the metal is temporarily caught up in the slipstream of uncertainty currently being generated,” said Gavin Wendt, a senior resource analyst with Mine Life Pty Ltd. in Sydney.

Eight of 16 traders, investors and analysts surveyed by Bloomberg said bullion would fall this week. Six forecast higher prices and two were neutral.

The metal should trade at $1,000 to $1,200 an ounce this year and may advance as high as $1,500 after that, Mark Bristow, chief executive officer of Randgold Resources Ltd., said today in a television interview. Fourth-quarter profit more than tripled on surging gold prices, the company said.

SPDR Holdings

Bullion held by SPDR Gold Trust, the biggest exchange- traded fund backed by the metal, increased 1.83 metric tons to 1,106.38 tons as of Feb. 5.

Also in New York, silver futures for March delivery rose 25.5 cents, or 1.7 percent, to $15.085 an ounce. Platinum for April delivery gained $5.90, or 0.4 percent, to $1,481 an ounce. March palladium jumped $9.40, or 2.4 percent, to $407.65 an ounce.

Palladium may average about $400 this year as fundamentals for the market improve, Sandy Wood, the executive head of Anglo Platinum Ltd.’s commercial unit, said today on a conference call. The metal, used in automotive pollution-control parts, averaged about $267 last year.

To contact the reporters on this story: Kyoungwha Kim in Singapore at kkim19@bloomberg.net; Nicholas Larkin in London at nlarkin1@bloomberg.net