Gold May Gain in New York on Concern Dollar Has Rallied Too Far

By Nicholas Larkin and Kyoungwha Kim

Feb. 11 (Bloomberg) -- Gold, little changed in New York today, may climb on speculation the dollar’s strength is overdone, increasing bullion’s appeal as an alternative asset.

The U.S. Dollar Index, a six-currency gauge of the greenback’s strength, added 0.2 percent after the agreement brokered by the European Union to help Greece weather its debt crisis offered few details. Industrial commodities including copper rose as reports in Australia and China signaled a stronger economic recovery.

“A lot of people believe that the dollar’s risen too far too fast and are flocking to gold,” said Tom Schweer, a senior market strategist at LaSalle Futures Group Inc. in Chicago. Gold may also be benefiting from higher prices of other commodities, he said.

Gold futures for April delivery added $3.10, or 0.3 percent, to $1,079.40 an ounce on the New York Mercantile Exchange’s Comex unit at 9:26 a.m. local time. Gold for immediate delivery in London was 0.7 percent higher at $1,079.10.

The metal increased to $1,079.50 an ounce in the morning “fixing” in London, used by some mining companies to sell production, from $1,069.50 at yesterday’s afternoon fixing. The dollar has gained as concern about Greece’s finances weighed on the euro.

“We expect dips to continue to draw investment interest” on sovereign debt concerns, while “the positive economic outlook in the Asian region has given gold a lift,” James Moore, an analyst at TheBullionDesk.com in London, said in a report.

Greece, Spain, Portugal

The dollar has climbed 4.8 percent against the euro this year on concern that fiscal gaps in Greece, Spain and Portugal may widen. Euro-region leaders including German Chancellor Angela Merkel ordered Greece to get the bloc’s highest budget deficit under control and said they are prepared to take “determined” action to staunch the worst crisis in the currency’s 11-year history.

Fewer Americans than anticipated filed claims for unemployment insurance last week, the Labor Department said today. Australia’s jobless rate unexpectedly fell last month amid the country’s biggest hiring boom in five years, while China’s statistics bureau said lending surged to 1.39 trillion yuan ($204 billion) in January and property prices climbed the most in 21 months.

“I won’t rule out that gold will go down to $950 or $1,000, but I don’t expect more downside,” investor Marc Faber, who publishes the “Gloom, Boom and Doom Report,” said in an interview with Bloomberg Television in Hong Kong. “I don’t see any scenario where gold will collapse.”

Central Banks

Gold advanced 24 percent in 2009, a ninth consecutive gain, as governments cut interest rates and spent trillions of dollars to prop up economies and central banks in nations including India and China boosted bullion reserves. Gold futures are down 1.5 percent this year.

The Federal Reserve may raise its discount rate “before long” as part of the “normalization” of lending, Chairman Ben S. Bernanke said yesterday in testimony for Congress. A change in the rate, currently at 0.5 percent, won’t signal an altered outlook for monetary policy, he said, repeating that low rates are warranted “for an extended period.”

Silver for March delivery in New York lost 0.2 percent to $15.27 an ounce. Platinum for April delivery fell 0.4 percent to $1,506.80 an ounce. Palladium for March delivery gained 0.9 percent to $417.05 an ounce.

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