Gold Heads for Fourth Weekly Gain, Dollar Weakens, Oil Hits Record

July 11 (Bloomberg) — Gold headed for its fourth weekly gain in London, as a weaker dollar and record energy prices spurred investors to buy the metal as a haven from inflation.

Gold often moves in line with the euro, with bullion gaining 15 percent this year and the euro advancing about 8 percent. The dollar is heading for a weekly loss against the euro on speculation a report today will show U.S. consumer confidence dropped to a 28-year low, signaling the Federal Reserve will refrain from raising interest rates this year.

“Given the mixture of worsening economic signals from the U.S. and western Europe, rising inflationary pressures and renewed geo-political tensions, we retain our bullish outlook,” said James Moore, an analyst at TheBullionDesk.com in London, in a report today.

Gold for immediate delivery rose $17.54, or 1.9 percent, to $965.20 an ounce by 2:32 p.m. in London. The metal is heading for a 3.4 percent gain on the week. Futures for August delivery climbed $23.80, or 2.5 percent, to $965.80 on the Comex division of the New York Mercantile Exchange.

Crude oil rallied to a record of $147.27 a barrel on concern Israel may be preparing to attack Iran, while a workers’ strike in Brazil and renewed militant activity in Nigeria is threatening to cut supplies.

Frank Wu, chief financial officer of Hang Fung Gold Technology Ltd., a Hong Kong-based jeweler, expects prices to stay near current levels this year.

We maintain “a relatively positive view about the gold price, mainly because we’re seeing the U.S. dollar quite weak, oil prices high and we’re not seeing any strong reasons for the gold price to come down yet,” Wu said.

Fuel Costs

Rising energy prices are weighing on the earnings outlook for automakers and airlines, spurring a decline in European stocks today and adding to the appeal of precious metals as an alternative investment. Europe’s Dow Jones Stoxx 600 Index has fallen 2.1 percent this week, heading for its sixth straight weekly drop and the longest losing streak since January.

“You see the indices coming down so I would assume there’s diversification going on again with the financial worries strengthening,” Alexander Zumpfe, a precious metals trader at Hanau, Germany-based Heraeus Metallhandels GmbH, said by phone. “It has definitely helped gold’s safe haven status.”

Among other metals for immediate delivery, platinum advanced $32.50, or 1.6 percent, to $2,039 an ounce, palladium gained $6, or 1.3 percent, to $455.50 an ounce and silver rose 50.5 cents, or 2.8 percent, to $18.795 an ounce.

Gold rose to $949 an ounce in the morning “fixing” in London from $939.50 at the previous afternoon fixing.

The fixing is conducted by telephone twice a day by five banks: Deutsche Bank AG, HSBC Holdings Ltd., Bank of Nova Scotia, Societe Generale SA and Barclays Plc.

Platinum fell to $2,030 an ounce in the afternoon “fixing” in London from $2,040 this morning. Palladium declined to $454 an ounce, from $455.

To contact the reporter on this story: Marianne Stigset in Oslo at mstigset@bloomberg.net

Last Updated: July 11, 2008 10:02 EDT
By Marianne Stigset

Source: Bloomberg

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