Gold Pares Gains in New York as Dollar Rises; Silver Advances

May 27 (Bloomberg) -- Gold prices were little changed in New York, paring an earlier gain, after demand for the metal as a store of value eased as the dollar rose. Silver advanced.

The U.S. Dollar Index, a six-currency gauge of the greenback’s value that includes the euro and yen, climbed after North Korea provoked international condemnation by exploding an atomic device on May 25 and test-firing missiles. The index fell 3.7 percent last week to a 2009 low, while gold increased 3 percent. The metal typically moves inversely to the dollar.

“The market is overbought,” Jon Nadler, a senior analyst at Kitco Metals Inc., said by e-mail. “Where are the jitters? North Korea did not do the trick,” he said. “Add it all up, and we see profit-taking as imminent.”

Gold futures for August delivery rose 10 cents to $955.20 on the New York Mercantile Exchange’s Comex division, after earlier climbing as much as 0.7 percent.

Bullion for immediate delivery in London was little changed, rising 55 cents to $952.55 an ounce. The metal rose to $951 an ounce in London’s afternoon “fixing,” used by some mining companies to sell their output, from $945 yesterday.

Silver futures for July delivery jumped 26.5 cents, or 1.8 percent to $14.865 an ounce in New York.

“I’m 100 percent sure that the U.S. will go into hyperinflation,” Marc Faber, publisher of the Gloom, Boom and Doom Report, said in a Bloomberg Television interview from Hong Kong. “I don’t think that gold will run up right away. I never sold gold and I’m still buying gold.”

‘Adequate Hedge’

Gold “has been an adequate hedge against inflation,” Faber said. “If you bought it in 1980 at the price of $850, then it hasn’t been a good hedge against inflation, but if you bought it in 1999 at $251, then it has done very well.”

Hedge funds and other large speculators increased their net-long position in New York gold futures last week, according to U.S. Commodity Futures Trading Commission data. The net-long position, or bets on higher prices, rose 7.7 percent from the previous week, the data show.

“The inverse correlation between gold prices and the U.S. currency will only strengthen once inflation concerns intensify,” said Andrey Kryuchenkov, an analyst at VTB Capital in London.

“Where is inflation? A speck on the horizon,” Kitco’s Nadler said.