Gold Rebounds in New York on Bets Dollar Will Extend Slump

Oct. 16 (Bloomberg) -- Gold prices rebounded in New York on speculation that the dollar will extend a slump, enhancing the appeal of the precious metal as an alternative asset.

The greenback is headed for the second straight weekly loss against a basket of six major currencies. Before today, gold rose 19 percent this year, while the dollar dropped 7.2 percent.

“On any type of dip, there will be buyers,” said Tom Hartmann, an AltaVest Worldwide Trading LLC analyst in Mission Viejo, California. “People want exposure to gold. Gold is directly dependent on the direction of the dollar, and over the long term, the dollar is headed lower.”

Gold futures for December delivery rose 90 cents, or 0.1 percent, to $1,051.50 an ounce on the New York Mercantile Exchange’s Comex division. Earlier, the metal fell as much as 0.7 percent. Prices rose 0.3 percent this week, the third straight weekly increase for the most-active contract.

The U.S. Dollar Index, the six-currency gauge, pared gains today after jumping as much as 0.6 percent.

President Barack Obama has raised U.S. marketable debt to a record $7.01 trillion as he borrows to revive the world’s biggest economy. The Federal Reserve has kept its target rate for overnight bank loans at zero to 0.25 percent for almost a year.

Confidence among U.S. consumers dropped more than forecast in October, indicating concern that an economic recovery will be fragile.

“Gold represents an asset which can protect investors from both inflationary and deflationary threats,” Deutsche Bank AG said in a report.

Gold will average $1,140 next year, up 8 percent from a previous estimate, because of “strong investor inflows,” Standard Chartered Plc said in a report. The bank raised its forecast for this quarter by 4.8 percent to $1,100.

“Longer term, gold has all the pieces of the puzzle to go much higher,” said Matt Zeman, a LaSalle Futures Group metals trader in Chicago. “In the short term, no one wants to buy on strength. The lack of follow-through buying is a disappointment if you’ve been long.”