Gold Rises Most in Week on Haven-Asset Demand, Korea Concern

March 26 (Bloomberg) -- Gold prices rose the most in a week on speculation that demand will increase amid escalating debt concerns in Europe and after a South Korean naval vessel sank near the border with North Korea.

“The bailout of Greece accomplished by the Europeans is only temporary,” said Dennis Gartman, an economist and the Gartman Letter’s editor. “The future of the euro remains dreadfully weak. That means those central banks who had been buying euros as a reservable asset, but are still fearful of owning more dollars, have no choice but to move toward gold.”

The euro gained as much as 1.1 percent against the dollar. European leaders endorsed a Franco-German proposal to help Greece with a mix of International Monetary Fund and bilateral loans. Gold priced in euros reached a record on March 5.

Gold futures for June delivery climbed $11.30, or 1 percent, to $1,105.40 an ounce on the Comex in New York, the biggest gain for a most-active contract since March 16. The price fell 0.2 percent this week.

The euro rebounded from a 10-month low after European leaders put the IMF on standby to help debt-stricken Greece and sought to reduce concerns that divisions on the issue would escalate the nation’s fiscal crisis.

The Greek plan “will no doubt give risk sentiment a short- term boost and is partially behind the gains with gold,” James Moore, an analyst at TheBullionDesk.com in London, said in a report. Concern that government debt may expand “will continue to prompt diversification away from fiat currencies and toward more tangible assets, particularly precious metals,” he said.

Korea Concern

Investors also bought gold after the Korean incident. A South Korean patrol vessel sank off the island of Baengnyeong in the Yellow Sea. The cause wasn’t immediately clear. The sinking prompted President Lee Myung Bak to meet with security officials in Seoul.

“We had an oversold condition and when the Korea news hit the desks, gold took off,” said Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago.

A rebound by the dollar may limit the metal’s gains, analysts said.

“Gold does not look attractive,” said Leonard Kaplan, the president of Prospector Asset Management in Evanston, Illinois. “The dollar is the cream of the currencies. The major problem for the dollar in the past few years has been the strength of the euro, and that is no longer the case.”

Gold rallied 24 percent last year as the euro gained 2.4 percent against the dollar.

Also in New York, silver futures for May delivery rose 16.5 cents, or 1 percent, to $16.906 an ounce on the Comex, down 0.7 percent for the week.

Platinum futures for July delivery fell $11.10, or 0.7 percent, to $1,600.70 an ounce on the New York Mercantile Exchange, extending this week’s decline to 0.5 percent. Palladium for June delivery gained $2.70, or 0.6 percent, to $455.30 an ounce on the Nymex, down 2.8 percent this week.

Oil Climbs From Two-Week Low on Speculation Demand Improving

March 29 (Bloomberg) -- Crude oil climbed from a two- week low on speculation demand will increase as the global economy recovers from its worst recession since World War II.

A report today in the U.S., the world’s largest oil user, will probably show personal spending rose for a fifth month in February, according to a Bloomberg news survey of economists. Major producers and consumers will this week try to agree on ways to reduce oil-price volatility, International Energy Forum Secretary-General Noe van Hulst said yesterday.

“We do seem to be getting some support for prices around that $80 a barrel level,” said Toby Hassall, research analyst at CWA Global Markets Pty in Sydney. “We’re seeing oil fairly range-bound, which isn’t too surprising, and we’re just not getting enough underlying strength in the crude oil market fundamentals to really give it a shove higher.”

Crude oil for May delivery rose as much as 39 cents, or 0.5 percent, to $80.39 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It was at $80.26 at 7:15 a.m. in Singapore.

The contract dropped 0.7 percent to $80 on March 26, the lowest close in almost two weeks, after a report showed the U.S. economy expanded less in the fourth quarter than analysts had estimated. Prices fell 1.2 percent for the week as U.S. crude oil stockpiles surged to a seven-month high and the rising dollar reduced the appeal of commodity investments.

Stronger Dollar

While the long-term bias is for prices to go higher, the prospect of a stronger dollar may weigh on oil and commodities in the short-term, Hassall said. Stronger growth in the U.S. may be needed before employment and consumer spending recovers, he said.

“It is looking like a protracted and uneven recovery over there and Europe isn’t looking any better,” he said. “The U.S. consumer sector looks particularly weak still. It’s not a particularly bright outlook for the U.S. It looks like they’ve turned a corner, but it’s going to be very slow.”

The U.S. currency fell against the euro today after European leaders agreed to a rescue plan for Greece. The dollar fell to $1.3446 to the euro in early Asian trading today, from $1.3410 in New York last week.

Brent crude oil for May settlement rose 21 cents, or 0.3 percent, to $79.50 a barrel on the London-based ICE Futures Europe exchange. It fell 0.4 percent to $79.29 on March 26.

New York oil futures have gained 1 percent this year, as global equities declined early in the period and the rising dollar slowed investor demand for oil and metals as investment havens.

Price Volatility

Prices jumped 78 percent last year after plunging to $32.40 a barrel in December 2008, the lowest in more than four years. New York futures reached a record $147.27 in July 2008.

“There is great acknowledgement, more now than there ever was, that this kind of volatility is not good for producers or consumers,” Van Hulst, secretary-general of the Riyadh-based International Energy Forum, said in Cancun, Mexico, yesterday. Better supply and demand data from developing nations are among measures that may improve transparency in global oil markets, he said.

Hedge-fund managers and other large speculators last week reduced their bets on rising oil prices for the first time since early February, according to U.S. Commodity Futures Trading Commission data.

Speculative net-long positions, the difference between orders to buy and sell the commodity, fell 9.9 percent to 111,919 contracts in the week ended March 23, the Washington- based commission said in a report.