Gold May Advance Toward $1,000 as Weakening Dollar Spurs Demand

By Nicholas Larkin

Sept. 7 (Bloomberg) -- Gold, little changed near a six- month high in London today, may rise toward $1,000 an ounce as a weakening dollar increases the metal’s appeal as an alternative investment. Silver climbed to a 13-month high.

The dollar slipped as much as 0.4 percent against the euro as a report showed European investor confidence increased for a second month in September. Gold tends to rise when the greenback weakens. Bullion last surpassed $1,000 on Feb. 20.

“The underlying factor is still the dollar,” Dan Smith, a Standard Chartered Plc analyst in London, said by phone today. “If we do see a break in the dollar, it could be one of the triggers to take gold higher.”

Immediate-delivery bullion added 79 cents, or 0.1 percent, to $995.19 an ounce by 4:52 p.m. in London, erasing a gain of as much as 0.3 percent. The metal jumped 4.1 percent last week, the most since April. December gold futures slipped 10 cents to $996.60 an ounce in electronic trading on the New York Mercantile Exchange’s Comex division.

Comex floor trading in New York and Chicago is closed today for the U.S. Labor Day holiday.

“Volatility could step up across the rest of the week as markets exit the summer doldrums and traders and investors position for the remainder of the year,” James Moore, an analyst at TheBullionDesk.com in London, wrote in a report.

Higher ‘Fixing’

The metal increased to $992.75 an ounce in the morning “fixing” in London, used by some mining companies to sell production, from $989 at the afternoon fixing on Sept. 4.

“Sustained gains could be difficult without a pull back,” Pradeep Unni, an analyst at Richcomm Global Services in Dubai, said in a report. “Gold could be hit by near-term profit- taking.”

Bullion is 3.6 percent below a record $1,032.70 an ounce set in London in March 2008 and has rallied every year since 2000. Spot prices have gained in seven of the past eight weeks.

“The price increase is of speculative nature, but gold will be able to temporarily break through the $1,000 mark,” Eugen Weinberg, a senior analyst with Commerzbank AG, wrote in a Sept. 4 note. “Currently there is insufficient fundamental support to allow for a sustained rise beyond this level.”

Holdings of bullion in the SPDR Gold Trust, the biggest exchange-traded fund backed by the metal, fell 0.38 metric ton to 1,077.63 tons on Sept. 4, data on the company’s Web site showed. The fund reached a record 1,134.03 tons on June 1. Holdings in ETF Securities Ltd.’s exchange-traded commodities rose 1,426 ounces to a record 7.993 million ounces on Sept. 4, its Web site showed.