Gold Rebounds From Biggest Drop in Three Weeks as Dollar Slides

Oct. 16 (Bloomberg) -- Gold climbed, rebounding after its biggest decline in three weeks, as the dollar’s five-day slide boosted investor demand for the precious metal.

Bullion is on course for its third weekly advance, having reached an all-time high of $1,070.80 an ounce on Oct. 14 as investors bought physical assets to hedge against the weaker dollar and the threat of inflation. Commodity-based exchange- traded funds have almost doubled assets under management since the end of 2008, Barclays Global Investors reported yesterday.

“The dollar’s downtrend remains intact and so does gold’s uptrend,” said Hwang Il Doo, a senior trader with KEB Futures Co. in Seoul. “A pause in the dollar’s loss may provide an excuse for investors to take profits which won’t of course alter the bullish outlook for precious metals.”

Gold for immediate delivery rose as much as 0.4 percent to $1,053.88 an ounce and traded at $1,053.05 at 10:10 a.m. in Singapore. Prices slumped 1.2 percent yesterday as record prices and a recovery by the dollar prompted selling.

December gold futures gained 0.3 percent to $1,053.90 an ounce on the New York Mercantile Exchange’s Comex division. The Dollar Index, a six-currency gauge of the greenback’s value, fell 0.2 percent to 75.34.

Commodity assets in exchange-traded funds jumped to $19.7 billion in the third quarter from $9.9 billion at start of the year, Deborah Fuhr, head of ETF research at Barclays, said yesterday. Assets climbed 20 percent from the second quarter.

Outlook

Gold may decline next week as record prices erode jewelry demand and prompt some investors to sell, a survey showed.

Nine of 16 traders, investors and analysts surveyed by Bloomberg said bullion would fall. Five forecast higher prices and two were neutral.

Bullion may decline to $1,025 an ounce then slide further toward the psychologically important $1000 mark, Commerzbank AG said yesterday, citing recent trading patterns.

“We can see that the market is coming off and the daily relative strength index has registered a bearish divergence,” Karen Jones said in a report. “We remain wary of failure” of a weekly close above $1,057 an ounce.

Among other precious metals, silver rose 0.7 percent to $17.48 an ounce and palladium gained 0.2 percent at $326.25 an ounce. Platinum fell 0.1 percent to $1,349.50 an ounce.