Gold Futures Advance to $1,000 an Ounce Amid Dollar Weakness

Sept. 8 (Bloomberg) -- Gold futures rose to $1,000 an ounce for the first time in more than six months as a weaker dollar boosted the metal’s appeal as an alternative investment.

The contract for December delivery reached $1,000 on the Comex division of the New York Mercantile Exchange, extending this year’s advance to 13 percent. Gold for immediate delivery touched $998.25 an ounce. Gold has rallied every year since 2000.

Governments cut interest rates and boosted spending to fight the worst recession since World War II, spurring investors to buy bullion as a hedge against potential inflation and debasement of currencies. The Dollar Index has lost 4.1 percent this year. Gold typically moves inversely to the U.S. currency.

“There’s not many good options for investors to hedge against a declining dollar and rising inflation,” Hwang Il Doo, head of trading with KEB Futures Co. in Seoul, said today. “Gold will rise to $1,100 an ounce by the end of the year, once physical demand from China and India adds fuel to the rally.”

Gold last traded at more than $1,000 on Feb. 20, the first time the metal had breached that price since March 2008. The futures then retreated as low as $865 on April 6. The December contract added 0.2 percent to $998.90 an ounce in New York as of 8:48 a.m. in Singapore. Spot gold traded at $997.20 an ounce.

Gold is cementing its status as a haven investment as governments seek to flood the financial system with cash in an effort to haul the global economy out of a recession. Gold futures record is $1,033.90 an ounce, reached on March 17, 2008.

‘Losing Control’

“The reasons to own gold as an investment make sense,” Sydney-based Greg Gibbs, a Royal Bank of Scotland Group Plc strategist, said in advance of the metal’s gain to $1,000 today. “It is a hedge against policy makers losing control of fiscal and quantitative monetary policies.”

U.S. President Barack Obama has increased U.S. marketable debt to an unprecedented $6.78 trillion as he borrows to spur the world’s largest economy. Goldman Sachs Group Inc. predicts that the U.S. will sell about $2.9 trillion of debt in the two years ending September 2010.

“Money has been printed massively,” said investor Jim Slater, who was deputy chairman of Galahad Gold Plc before it liquidated in 2008. “Inflation will follow fairly soon” and there may be “a hint of hyperinflation. Even a hint will be very good news for gold.”

The Dollar Index, a six-currency gauge of the dollar’s value, declined for a third day today, trading near the lowest since Sept. 2008.