Wire: BLOOMBERG News (BN) Date: Sep 8 2009  11:09:10
Gold Advances to $1,000 on Dollar’s Weakness, Inflation Hedge
 
 By Nicholas Larkin, Halia Pavliva and Kim Kyoungwha
     Sept. 8 (Bloomberg) -- Gold futures climbed to $1,000 an
ounce for the first time in more than six months as a weaker
dollar and concern that inflation may accelerate boosted the
precious metal’s appeal.
     The contract for December delivery touched exactly $1,000
on the Comex division of the New York Mercantile Exchange,
taking this year’s rise to 13 percent. Immediate-delivery metal
rose to $998.25 an ounce. Gold is set for a ninth yearly gain.
     Governments have cut interest rates and boosted spending to
fight the worst recession since World War II, spurring investors
to buy bullion as a hedge against potential inflation and
debasement of currencies. The Dollar Index has lost 4.1 percent
this year. Gold typically moves inversely to the U.S. currency.
     “There’s not many good options for investors to hedge
against a declining dollar and rising inflation,” Hwang Il Doo,
head of trading with KEB Futures Co., said today from Seoul.
“Gold will rise to $1,100 an ounce by the end of the year, once
physical demand from China and India adds fuel to the rally.”
     Gold last traded at more than $1,000 on Feb. 20, the first
time the metal had breached that price since March 2008. Futures
then retreated to as low as $865 on April 6. The December
contract added 0.1 percent to $998.20 an ounce in New York at
10:53 a.m. in Singapore. Spot gold traded at $996.59.
     The metal’s advance boosted producers. Newcrest Mining Ltd.,
Australia’s largest gold-mining company, gained as much as 4
percent to A$33.86, and Lihir Gold Ltd., the second-largest,
increased 4.7 percent. Zijin Mining Group Co., China’s largest
producer, rose 4 percent in Hong Kong.
 
                        Haven Investment
 
     Gold may be cementing its status as a haven investment as
governments seek to flood the financial system with cash in an
effort to haul the global economy out of a recession. The record
for gold futures is $1,033.90 an ounce, reached March 17, 2008.
     “The reasons to own gold as an investment make sense,”
Sydney-based Greg Gibbs, a Royal Bank of Scotland Group Plc
strategist, said in advance of the metal’s gain to $1,000 today.
“It is a hedge against policy makers losing control of fiscal
and quantitative monetary policies.”
     The Dollar Index, a six-currency gauge of the dollar’s
value, declined for a third day today.
     U.S. President Barack Obama has increased U.S. marketable
debt to an unprecedented $6.78 trillion as he borrows to spur
the world’s largest economy. Goldman Sachs Group Inc. predicts
that the U.S. will sell about $2.9 trillion of debt in the two
years ending September 2010.
 
                    ‘Hint of Hyperinflation’
 
     “Money has been printed massively,” said investor Jim
Slater, who was deputy chairman of Galahad Gold Plc before it
liquidated in 2008. “Inflation will follow fairly soon” and
there may be “a hint of hyperinflation. Even a hint will be
very good news for gold,” said Slater.
     Crude-oil futures, used by some investors as an inflation-
outlook guide, have soared 53 percent this year. Consumer prices
will rise 0.9 percent in advanced economies next year compared
with 0.1 percent in 2009, the International Monetary Fund
forecast in July. In other countries, prices may gain 4.6
percent in 2010, from 5.3 percent this year, the fund said.
     Gold at more than $1,000 may attract more investors seeking
to take advantage of the longest advance in the metal’s price in
60 years. Assets in some of the industry’s largest exchange-
traded funds have reached all-time highs the past few months.
     The SPDR Gold Trust, the biggest ETF backed by the metal,
reached a record 1,134.03 metric tons on June 1. The fund, which
held 1,077.63 tons as of Sept. 4, has overtaken Switzerland as
the world’s sixth-largest gold holding.
 
                         Indian Demand
 
     Investors bought 222.4 tons of bullion in the second
quarter, 46 percent more than a year earlier, the World Gold
Council said in August. That’s less than 595.9 tons in the first
quarter, when investment demand exceeded usage by jewelers for
the first time since at least 2004.
     The National Spot Exchange Ltd. in India, the world’s
largest consumer, launched small-denomination contracts in June
to lure households to trade physical gold. In China “ongoing
strength in demand” led by individual investors boosted sales 6
percent in the second quarter, the World Gold Council has said.
     “The market has the power to move up further,” said
Ellison Chu, a metals manager with Standard Bank Asia Ltd.,
citing dollar weakness. Still, “the risk is that speculative
investors could be tempted to sell out,” said Chu.
     Other precious metals have outperformed gold this year.
Silver for immediate delivery gained 0.7 percent to $16.45 an
ounce today, the highest since August 2008. It has climbed 44
percent this year.
     Platinum added 0.4 percent to $1,265 an ounce, increasing
its gain this year to 35 percent. Palladium, the best performing
precious metal this year, was 0.3 percent lower at $293.25 an
ounce. It has gained 57 percent in 2009.
     “We are still skeptical that this is a sustainable rally
and a comeback could be very painful,” Andrey Kryuchenkov, a
VTB Capital analyst in London, said before today’s advance in
gold. “Risk-averse buying is nowhere near the levels we saw
last winter.”
 
For Related News and Information:
Top commodity stories: CTOP <GO>
Top metals stories: METT <GO>
Most-read metals stories: MNI MET <GO>
U.S. Economic calendar: ECO US <GO>
World gold reserves: WGO <GO>
Gold lease rates: GLDL <GO>
Gold back testing: GOLDS <Cmdty> BTST <GO>
 
--With assistance from Glenys and Shamin Adam in Singapore,
Jesse Riseborough in Melbourne and Tan Hwee Ann in Hong Kong.
Editors: Jake Lloyd-Smith, Ravil Shirodkar
 
To contact the reporters on this story:
Kyoungwha Kim in Singapore at +65-6212-1895 or
Kkim19@bloomberg.net;
Nicholas Larkin in London at +44-20-7673-2069 or
nlarkin1@bloomberg.net;
Halia Pavliva in New York at +1-212-617-7221 or
hpavliva@bloomberg.net
 
To contact the editors responsible for this story:
James Poole at +65-6212-1551 or
jpoole4@bloomberg.net;
Stuart Wallace at +44-20-7673-2388 or
swallace6@bloomberg.net