Gold Climbs to Record on Weaker Dollar, Global Recovery Concern

Gold ingots are seen stacked. Photographer: Adrian Moser/Bloomberg

Gold rose to a record for a third day in London and New York as a weaker dollar and concern that the recovery may be faltering boosted demand for the metal as a protection of wealth.

The dollar weakened to near a five-week low against the euro before a report today that may show the U.S. housing market remains weak and on speculation the Federal Reserve will say at a meeting tomorrow it’s considering further measures to keep borrowing costs low. Holdings in gold-backed exchange-traded products reached a record Sept. 17. Silver traded 2.3 percent below $21.355 an ounce, the highest price since 1980.

“We’re still seeing the same old story that market participants remain bullish on gold, fearing a slowdown in economic activity,” Peter Fertig, owner of Quantitative Commodity Research Ltd. in Hainburg, Germany, said today by phone. “The weaker dollar is definitely one of the factors supporting precious metals.”

Immediate-delivery bullion climbed as much as $9.07, or 0.7 percent, to $1,283.38 an ounce and traded at $1,280 at 11:37 a.m. in London. Prices added 2.3 percent last week, the most in three months. Gold for December delivery gained as much as 0.6 percent to $1,284.90 on the Comex in New York and was last at $1,281.40.

The metal rose to $1,280.25 in the morning “fixing” in London, used by some mining companies to sell output, from $1,274 at the afternoon fixing on Sept. 17. The dollar fell as much as 0.5 percent against the euro and slipped to a five-week low on Sept. 17. Gold and the greenback usually move inversely.

Winning Streak

Gold, up 17 percent this year, is heading for its 10th consecutive annual gain, the longest winning streak since at least 1920. Bullion has outperformed global equities, Treasuries and most industrial metals, prompting record investments in gold-backed ETPs. The metal rallied as central banks and governments maintained low borrowing costs and spent trillions of dollars to stimulate their economies.

The Fed is likely to affirm at tomorrow’s meeting its pledge to keep interest rates low for an “extended period” and maintain the floor on its holdings of securities, according to economists surveyed by Bloomberg.

The Thomson Reuters/University of Michigan preliminary index of consumer sentiment dropped to a one-year low of 66.6, figures showed Sept. 17. Economists in a Bloomberg News survey estimate that a National Association of Home Builders/Wells Fargo confidence index due today will record a level of 14 for September, up from 13 last month. Readings below 50 mean more respondents said conditions were poor.

‘People Are Skeptical’

“There is still a little bit of concern about bits of data and whether we are actually seeing signs of recovery in the U.S.,” Darren Heathcote, head of trading at Investec Bank (Australia) Ltd. in Sydney, said by phone. “People are skeptical, and consequently gold has followed the euro higher.”

Prices may test $1,300 an ounce “in the days ahead,” Heathcote said.

Global holdings of gold by ETPs gained 6.25 metric tons to a record 2,084.15 tons on Sept. 17, according to Bloomberg data from 10 providers. Holdings are up 16 percent this year.

Prices have gained this year even as U.S. inflation slowed. Bullion is traditionally bought as a hedge against rising consumer prices. Inflation expectations, based on the 10-year U.S. Treasury breakeven rate, have fallen to 1.79 percent from 2.21 percent six months ago.

Silver for immediate delivery in London gained as much as 1 percent to $20.9688 an ounce and was last at $20.8850. The metal reached $20.995 on Sept. 17, the highest price since March 2008, and is up 24 percent this year.

Platinum added 0.5 percent to $1,626.55 an ounce. Prices reached $1,631.50 on Sept. 17, the highest level since May 19. Palladium rose 0.3 percent to $543.75 an ounce.

To contact the reporters on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net; Wendy Pugh in Melbourne at wpugh@bloomberg.net.