Gold Rises As Dollar Drops Amid Concern U.S. Economy Is Slowing
Gold Rises as Dollar Drops Amid Concern U.S. Economy Is Slowing
http://www.bloomberg.com/apps/news?p...Q&refer=canada
By Chia-Peck Wong
Nov. 1 (Bloomberg) -- Gold prices rose for a seventh day as concerns about a slowdown in the U.S. economy led its currency to decline, prompting some investors to buy the precious metal as an alternative investment.
Investors typically buy gold to hedge against a drop in the value of other dollar-denominated assets. The dollar declined to its weakest in five weeks against the yen yesterday as reports showed consumer confidence unexpectedly fell, and Chicago factory output slowed.
"The weak dollar has triggered some buying," Peter Tse, chief precious metals dealer at ScotiaMocatta, the bullion arm of Bank of Nova Scotia, said today from Hong Kong. ``We may see another $10 follow-through with some more data coming out of the U.S.'' should gold close above $610, he said.
Gold for immediate delivery rose as much as $2.70, or 0.5 percent, to $609.30 an ounce. It traded at $608.20 at 12:11 p.m. Singapore time.
The dollar may weaken for a sixth day against the yen as U.S. manufacturing and consumer sentiment reports provide more evidence the economy is slowing. A private industry report today may show manufacturing in the U.S. grew the least since May 2005.
The dollar traded at 116.97 yen at 1:11 p.m. in Tokyo from 116.98 yen in New York late yesterday, when it fell to 116.63, the lowest since Sept. 26.
Consumer Sentiment
The Conference Board's index of U.S. consumer sentiment declined to 105.4 in October from a revised 105.9 a month earlier. That compared with the median forecast of 108 in a Bloomberg survey. The index averaged 105.4 in the first nine months of 2006.
The National Association of Purchasing Management-Chicago said its business index dropped to 53.5 last month from 62.1 in September. The median estimate of 54 economists was 58.
The correlation coefficient between gold and the dollar was a negative 0.86 in the past year, meaning that the bullion typically moves in the opposite direction to the dollar.
The charts some traders use to predict price moves also indicate further gains may be in line for gold, Karen Jones, a London-based analyst at Commerzbank AG, said in a report yesterday.
Gold for immediate delivery has ``severed its five-month downtrend,'' and may rise to $615 in the near term, she said.
Bullion for December delivery gained $3.00, or 0.5 percent, to $609.80 an ounce in after-hours trading on the Comex division of the New York Mercantile Exchange at 12:05 p.m. Singapore time.
