Gold Gains as Dollar Decline Spurs Demand for Precious Metals

Aug. 13 (Bloomberg) -- Gold rose to the highest price this week as the dollar declined, increasing the metal’s appeal as an alternative investment. Silver climbed to a two-month high, and platinum and palladium rose.

The dollar fell for a third day against a basket of six major currencies after a report showed U.S. retail sales unexpectedly fell last month, adding to concern that consumers are unwilling to increase spending. The greenback slid as much as 0.9 percent against the euro after the German economy, Europe’s largest, unexpectedly expanded in the second quarter. Bullion tends to climb when the U.S. currency weakens.

“The dollar is under fire today,” GoldCore Ltd., a brokerage in Dublin, said in a note to clients. “Gold is taking up the slack.”

Gold futures for December delivery rose $4, or 0.4 percent, to $956.50 an ounce on the New York Mercantile Exchange’s Comex division. Earlier, the price reached $963.10, the highest since Aug. 7.

“Today’s session close over the 20-day moving average is a good sign from the bullish prospective,” Al Abaroa, a senior commodities strategist at OptionsPro Corp. in Plantation, Florida, said by e-mail.

In London, bullion for immediate delivery advanced $7.70, or 0.8 percent, to $954.80 an ounce at 7:50 p.m. local time. Spot prices slid for five days through Aug. 11, the longest decline in five months.

Gold Tracks Dollar

“Gold prices continue to track currency movements and bounce back above the $950-an-ounce level,” Suki Cooper, an analyst at Barclays Capital in London, said in a report.

The metal slipped to $953.50 in the London afternoon “fixing,” the price used by some mining companies to sell their output, from $956 in the morning fixing.

U.S. retail sales fell 0.1 percent in July from June, the Commerce Department said today in Washington. The median forecast of 76 economists in a Bloomberg News survey was for an increase of 0.8 percent.

The Federal Reserve yesterday extended by a month the scheduled completion of a $300 billion program to purchase U.S. Treasuries, or so-called quantitative easing, aiming for a “smooth transition in markets,” according to a statement from the central bank. The Fed left the target rate for overnight bank lending between zero and 0.25 percent, near record lows.

Inflation Effect

Gold “should remain supported by the inflationary impact of the Fed’s rate decision, in addition to the boost to general risk sentiment,” James Moore, an analyst at TheBullionDesk.com in London, said in a report.

Expectations for a weaker dollar over the next six months increased, according to 2,345 respondents from New York to Tokyo in the Bloomberg Professional Global Confidence Index.

Gold will average $925 an ounce in next year, ING Groep NV said yesterday in a report, 16 percent higher than a previous forecast, because of “potentially inflationary implications of quantitative easing” and limited mine-output growth. The bank raised this year’s price estimate to $925 from $900.

Silver futures for September delivery gained 40.2 cents, or 2.8 percent, to $14.987 an ounce in New York, after touching $15.145, the highest for a most-active contract since June 12. The price will average $13.50 next year, 17 percent higher than its previous estimate, ING said.

Platinum for October delivery rose $28.30, or 2.3 percent, to $1,272.70 an ounce, and palladium for September delivery gained $4.80, or 1.8 percent, to $278.15 an ounce in New York.