Gold Advances as Dollar, Equity Drop Boosts Investment Demand

Oct. 5 (Bloomberg) -- Gold rose for a second day in Asia as the dollar and stock markets tumbled, boosting demand for the precious metal as an alternative investment.

Holdings in the SPDR Gold Trust, the biggest exchange- traded fund backed by the metal, expanded 1.2 metric tons to 1,096.55 tons on Oct. 2, data on the company’s Web site showed. The trust’s holdings increased 3.1 percent in the past month and are 3.3 percent off the record 1,134.03 tons reached June 2.

“We’re seeing a recovery in investment and even jewelry demand as other currencies appreciate against the dollar and gold becomes cheaper for those who hold other currencies,” Dick Poon, manager of the precious metals trading desk at Heraeus Ltd., said from Hong Kong. “The approach of the yearend festive season will likely take gold to a record.”

Gold for immediate delivery traded 0.3 percent higher at $1,005.65 an ounce at 2:30 p.m. in Singapore, extending last week’s 1.2 percent advance. December-delivery bullion on the Comex division of the New York Mercantile Exchange was little changed at $1,006.50 an ounce.

Eleven of 24 traders, investors and analysts surveyed by Bloomberg, or 46 percent, said gold will rise this week as a weakening dollar prompts investors to buy the metal. Nine forecast lower prices and four were neutral.

Gold has risen about 1.1 percent in the past month as the Dollar Index, which tracks the greenback against the currencies of six trading partners including the euro and yen, lost 1.9 percent. The benchmark MSCI Asia Pacific Index slid for a third day today to the lowest in almost a month.

Jewelry Demand

“Orders by jewelry makers are ongoing,” said Poon. “While it’s nowhere near the highs we saw in previous years, it has definitely improved from the first quarter of this year.”

The October-December period is the busiest season for jewelry sales in India, the world’s largest consumer of the metal, spurred by the wedding season and the Diwali holiday. The country’s gold imports probably fell for the fifth month in September as rising prices deterred jewelry buyers, a traders’ group said Sept. 30.

The country’s overseas purchases may total 50 tons in September, compared with 54 tons a year ago, said Harmesh Arora, vice president of the Bombay Bullion Association Ltd., citing preliminary data.

Among other precious metals for immediate delivery, silver gained 1.1 percent to $16.3425 an ounce, platinum and palladium were little changed at $1,282 an ounce and $296 an ounce respectively.