Gold Gains on Inflation-Hedge Demand, Higher Oil; Silver Climbs

July 17 (Bloomberg) -- Gold advanced on rising demand for the precious metal as a hedge against inflation after U.S. housing starts increased in June, adding to signs the world’s biggest economy is stabilizing. Silver also gained.

Home-building starts rose 3.6 percent to an annual rate of 582,000, the highest since November, the Commerce Department said today in Washington. Building permits, a sign of future construction, jumped the most in a year. Crude-oil futures, used by some investors as an inflation indicator, advanced. Some investors use gold as a store of value.

“Fresh buying will be supported by a weakening dollar and a build in inflation expectations,” Suki Cooper, a Barclays Capital analyst in London, said today in a report.

Gold futures for August delivery gained $2.10, or 0.2 percent, to $937.50 an ounce on the New York Mercantile Exchange’s Comex division.

Bullion for immediate delivery in London advanced $1.24, or 0.1 percent, to $938.59 an ounce at 7:21 p.m. local time.

Silver futures for September delivery increased 16.8 cents, or 1.3 percent to $13.403 an ounce in New York.

Gold “will continue to look to both the dollar and broader market movement for direction,” James Moore, an analyst at TheBullionDesk.com in London, said today in a note.

The metal rose to $937.50 in the London afternoon “fixing,” the price used by some mining companies to sell their output, from $934.50 in the morning fixing.

Dollar Index

The U.S. Dollar Index, a six-currency gauge of the greenback’s value, was headed for a loss of about 1 percent for the week. Gold, which tends to rise when the dollar falls, rose 2.7 percent this week after two straight weekly drops.

Crude-oil futures climbed as much as 3.2 percent in New York, nearing $64 a barrel. Oil headed for a weekly increase of more than 6 percent.

“We expect markets to become thinner and more volatile” in the next several weeks, Moore said. He predicted gold will trade between $905 and $950 an ounce.

Investment in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, rose 0.3 metric ton to 1,094.85 tons as of yesterday, the company’s Web site showed. That’s the first increase since the fund reached a record 1,134.03 tons almost seven weeks ago.