Gold Gains in New York, Erasing Earlier Loss, as Dollar Eases

Sept. 29 (Bloomberg) -- Gold rose in New York, erasing an earlier loss, as the dollar pared gains, spurring demand for the precious metal as an alternative investment.

The dollar climbed as much as 0.4 percent against a basket of six major currencies before trading little changed. Gold has advanced 12 percent this year, while the greenback fell 5.2 percent against the basket.

“As the dollar starts to weaken and the stock market comes back, gold is finding a base,” said Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago.

Gold futures for December delivery rose 30 cents to settle at $994.40 an ounce on the Comex division of the New York Mercantile Exchange. The metal rose as much 0.3 percent and dropped as much as 0.8 percent.

The Standard & Poor’s 500 Index rose was little changed at 2:18 p.m. after earlier dropping as much as 0.5 percent. Gold for immediate delivery gained $1.35 to $992.40 an ounce.

“Gold is looking at the dollar and the stock market for direction,” McGhee said. “At this point, it could drop $25 or rally $25.”

“A hesitancy has emerged among fast money to buy gold due to fears of excess long positioning in futures and concerns about the sustainability of both dollar weakness and the broader trend of risk-asset growth,” John Reade, UBS AG’s head metals strategist in London, said in a report. “We continue to expect a deeper correction in gold and silver in coming weeks.”

Gold is heading for a ninth straight annual gain. Hedge- fund managers and other large speculators increased their bets on rising futures to a record in the week ended Sept. 22, the U.S. Commodity Futures Trading Commission said last week. Net- long positions gained by 1,102 contracts to 236,749 contracts.

Silver for December delivery dropped 1.7 cents to $16.178 an ounce.