Gold Rises Most in a Week as Dollar Drop Spurs Demand for Metal

Dec. 24 (Bloomberg) -- Gold rose the most in a week as a drop in the dollar spurred demand for precious metals as alternative assets. Silver, platinum and palladium also gained.

The dollar fell to the lowest level this week against a basket of six major currencies, losing as much as 0.5 percent. Bullion, which some traders buy as a hedge against inflation, typically rises when the dollar falls. The metal has gained 25 percent this year, touching a record $1,227.50 an ounce earlier this month, as the dollar slipped more than 4 percent.

“Sentiment remains firm this morning as the greenback remains under pressure,” James Moore, an analyst at TheBullionDesk.com in London, said in a report.

Gold futures for February delivery gained $10.80, or 1 percent, to $1,104.80 an ounce on the New York Mercantile Exchange’s Comex unit, the biggest advance since Dec. 16.

The metal has rallied this year as U.S. growth slumped during the longest recession since World War II, spurring demand for an investment haven. Gold held by the SPDR Gold Trust, the biggest exchange-traded fund backed by bullion, was unchanged for a second day at 1,132.71 metric tons as of yesterday, according to the company’s Web site.

Signs of improving U.S. growth sparked a rally in the dollar this month, after the currency fell to a 15-month low in November. Before today, gold slid 7.5 percent in December as the U.S. Dollar Index, the six-currency basket, rose 4 percent.

Dollar Rally Ending

“It looks like gold has found a new support level, and the brief rally we saw in the dollar is ending,” said Michael K. Smith, the president of T&K Futures & Options in Port St. Lucie, Florida. “As the dollar makes its way lower now, gold will benefit.”

Investors should avoid building new positions in a market thinned out by year-end holidays, said Jon Nadler, a Kitco Inc. senior analyst in Montreal.

In London, gold for immediate delivery climbed $17.68, or 1.6 percent, to $1,105.23 an ounce at 6:40 p.m. local time.

In New York, silver futures for March delivery rose 25 cents, or 1.5 percent, to $17.44 an ounce on the Comex. Platinum for April delivery gained 2.9 percent, the most in five weeks, to $1,474 an ounce on the Nymex, and palladium for March delivery surged 9 percent, the most in 13 months, to $389.65 an ounce.