Gold gained for a second day in London as a weaker dollar boosted demand for the precious metal as an alternative investment.
The dollar fell to a three-week low against the euro on speculation the Federal Reserve may signal today it’s open to increasing debt purchases beyond the $600 billion already announced. Gold, which usually moves inversely to the greenback, reached a record $1,431.25 an ounce on Dec. 7.
“The U.S. dollar weakness is driving gold,” Peter Fertig, owner of Quantitative Commodity Research Ltd. in Hainburg, Germany, said today by phone. “There’s still an argument for further implementation of quantitative easing in the U.S. That would benefit gold.”
Immediate-delivery bullion added $9.75, or 0.7 percent, to $1,403.93 an ounce at 9:39 a.m. in London. The metal for February delivery was 0.5 percent higher at $1,404.50 on the Comex in New York.
Gold gained 28 percent this year, set for a 10th annual gain, as investors lost confidence in currencies and bought precious metals as a protection of wealth. Further government bond purchases by the Fed are “certainly possible,” Chairman Ben S. Bernanke said in an interview broadcast on CBS Corp.’s “60 Minutes” on Dec. 5.
Gold will average $1,550 next year, up from a previous forecast of $1,400, UBS AG analyst Julien Garran wrote in a report yesterday. Platinum and palladium are also among the bank’s top picks for next year, Garran said.
‘Safety Drive’
“We expect European debt concerns, continuing implications of quantitative easing and an ongoing safety drive to fuel investor demand,” Garran said. “Absolute faith in fiat currencies remains shaky. Gold is currently behaving as a currency rather than a commodity.”
Gold assets in exchange-traded products rose 2.98 metric tons to 2,096.39 tons yesterday, according to data compiled by Bloomberg from 10 providers. Holdings reached a record 2,104.65 tons on Oct. 14. Silver holdings gained 51.02 tons to 15,090.16 tons, the highest amount since at least February, data from four providers show.
Silver for immediate delivery in London rose 0.8 percent to $29.7600 an ounce. It rose to $30.7025 on Dec. 7, the highest level since March 1980, and is up 76 percent this year. Prices reached an all-time high of $50.35 in New York in 1980, a year after the Hunt brothers tried to corner the market.
Palladium added 0.3 percent to $759.75 an ounce. Prices climbed to $779.10 on Dec. 3, the highest price since April 2001. It will be the best-performing precious metal in 2011, UBS said, raising its forecast to $800 from $625. A climb to $1,000 is “quite possible,” the bank said. Platinum was 0.8 percent higher at $1,713.75 an ounce.
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