Gold rises tad as dollar loses ground vs euro

(Reuters)

22 October 2009

NEW YORK/LONDON - Gold prices turned higher on Thursday, reversing early losses as the dollar continued to lose ground against the euro, increasing interest in the metal as an alternative to the U.S. currency. The metal continued to take heart from the expected long-term weakness of the dollar. Investors were turning to gold as the depreciation of global currencies threatened the value of paper assets. “I don’t think we necessarily need to see a lot lower dollar to see the gold price rally. We could have a gold price rally in other currencies more than the dollar,” said Caesar Bryan, portfolio manager at the $580 million GAMCO Gold Fund in New York. Spot gold was at $1,059.15 an ounce at 3:21 p.m. EDT (1921 GMT), against $1,058.35 late in New York on Wednesday. U.S. December gold futures settled down $5.90 at $1,058.60 an ounce on the COMEX division of the New York Mercantile Exchange. A decline in the equity markets in early trade dented appetite for risk, benefiting the dollar at the expense of higher-yielding currencies. U.S. stocks, however, turned higher in late sessions, as the Dow rose 1.5 percent. Pradeep Unni, a senior analyst at Richcomm Global Services, said dollar weakness was still likely to hold the metal in a range between $1,044 and $1,071, but added that consolidation may be necessary before another push higher. For a graphic showing the gold price in various currencies, click here:http://graphics.thomsonreuters.com/109/CMD_GLDCUR1009.gif In New York late sessions, the dollar turned weaker versus the euro as Wall Street rallied amid returning risk appetite. SLACK DEMAND Demand for physical gold remained slow, with jewelry buying tailing off in major consumer India after last week’s festival period and as a decline in the rupee made dollar-priced assets more expensive. The world’s largest gold exchange-traded fund, the SPDR Gold Trust, also reported an outflow on Wednesday. Its holdings fell nearly 40,000 ounces or 0.1 percent. Demand from gold investment products and exchange-traded funds grew in the third quarter despite weak jewelry demand, a report by World Gold Council showed. Total volume of gold bullion bought via ETFs rose by 38.5 tonnes to a record 1,732.5 tonnes for the quarter, the industry-sponsored WGC said in an October report. Among other precious metals, silver was at $17.58 an ounce against $17.66 late on Wednesday, tracking losses in gold. Platinum was at $1,364 an ounce against $1,359. Palladium was at $335, up from its previous session late quote at $332.50, supported by fears over the outlook for Russian and South African supply and hopes for a recovery in automotive demand. Platinum and palladium are mainly used in autocatalysts. Investment demand is also strong. ETF Securities said holdings of its London palladium exchange-traded commodity rose nearly 9,000 ounces on Wednesday to record highs.