Gold Rebounds on Outlook for Low U.S. Interest Rates, Dollar

Jan. 13 (Bloomberg) -- Gold rose for the third time in four sessions on speculation that the Federal Reserve will hold U.S. lending rates low for an extended period, eroding the value of the dollar.

The greenback dropped as much as 0.5 percent against a basket of six major currencies. Gold rose 24 percent last year as the central bank kept rates at close to zero percent to spur the economy, helping send the dollar down 4.2 percent.

“If the Fed foolishly keeps interest rates too low for too long, money is going to flow into gold and commodities,” said Leonard Kaplan, the president of Prospector Asset Management in Evanston, Illinois.

Gold futures for February delivery rose $7.40, or 0.7 percent, to $1,136.80 an ounce on the Comex division of the New York Mercantile Exchange. Prices climbed as much as 0.8 percent and dropped as much as 1 percent.

The metal may top $1,200 in the first half of the year on demand for a hedge against inflation, said Philip Klapwijk, the chairman of London-based researcher GFMS Ltd.

In 2009, gold rallied for the ninth straight year, reaching an all-time high of $1,227.50 on Dec. 3.

Gold imports by India, the world’s biggest buyer, fell 18 percent to 343 metric tons last year as record prices curbed demand from jewelers and housewives, the Bombay Bullion Association Ltd. said today.

“This is not the time to hold long-term positions,” Kaplan said. “Gold is still just too expensive.”

Silver futures for March delivery rose 29.5 cents, or 1.6 percent, to $18.55 an ounce in New York. The metal is up 74 percent in the past 12 months.

Platinum futures for April delivery fell $4.20, or 0.3 percent, to $1,574.40 an ounce. Palladium for March delivery dropped 85 cents, or 0.2 percent, to $424.95 an ounce.

Platinum will average $1,525 this year, 16 percent above an earlier estimate, Morgan Stanley said today in a report. Palladium will average $372, 44 percent higher than a previous projection, the bank said.