| Gold Prices Extend Rally as ‘Odious’ Dollar Drops Versus Euro |
August 6, 2010 - 1:51pm — europac admin
By:
Pham-Duy Nguyen
Source:
Bloomberg Businessweek
August 6, 2010
Aug. 6 (Bloomberg) -- Gold futures rose, extending the longest rally since November, as the dollar dropped against the euro, boosting the appeal of the precious metal as an alternative asset.
The greenback fell as much as 1.1 percent after a payroll report signaled the U.S. will be slow in recouping jobs lost in the recession. Gold reached a three-week high. Before today, the metal increased 9.4 percent this year, climbing to a record $1,266.50 an ounce on June 21.
“The dollar is getting odious compared to the euro, which was the rankest thing around in the first half of this year,” said Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago. “If the Fed has to do something more accommodative to spur the economy, you’re going to see an explosive rally in gold.”
Gold futures for December delivery rose $9.80, or 0.8 percent, to $1,209.10 at 12:07 p.m. on the Comex in New York. The metal headed for the eighth straight gain, the longest rally since November. Earlier, the price reached $1,213.30, the highest level for a most-active contract since July 15.
The euro rose to a three-month high against the dollar.
‘Flee the Dollar’
“It is now widely accepted that the continued domestic weakness will cause the Fed to significantly expand stimulus efforts through so-called quantitative easing,” Peter Schiff, the president of Euro Pacific Capital in Darien, Connecticut, said in a report. “It’s a strong signal for traders to flee the dollar.”
The Federal Reserve has kept its benchmark interest rate at zero percent to 0.25 percent since December 2008 to revive the economy. The European Central Bank yesterday kept its main rate at 1 percent. The Fed’s next decision on interest rates is Aug. 10.
Gold priced in euros also reached a record in June amid Europe’s sovereign-debt crisis. The metal has historically moved in tandem with the euro as an alternative to the dollar.
“The positive correlation of gold prices to the euro is re-establishing itself,” Deutsche Bank AG said in a report. “Given our bearish outlook for the dollar, we believe this will trigger further gains in the gold price.”
The bank forecast gold will average $1,275 in the third quarter.
Silver futures for September delivery rose 16.9 cents, or 0.9 percent, to $18.49 an ounce on the Comex.
Platinum futures for October delivery fell $2.50, or 0.2 percent, to $1,570 an ounce on the New York Mercantile Exchange.
Palladium futures for September delivery declined $7.50, or 1.5 percent, to $488.55 an ounce.
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