Capital Gold Group Report: Gold Rises as Low Price May Spur Demand for Metal; Silver Gains
By Claudia Carpenter and Millie Munshi
June 2 (Bloomberg) -- Gold rose on speculation that investors may stock up on the metal after the biggest weekly drop in price since mid-March. Silver also gained.
The 14-day relative strength index for gold futures last week dropped to 42, a signal that prices may be poised to climb, analysts said. Gold, which declined 3.7 percent last week, will rise into the first quarter, according to forecasts by analysts compiled by Bloomberg.
``Gold's making a comeback as people think it's a little cheap,'' said Miguel Perez-Santalla, a vice president of sales at Heraeus Precious Metals Management in New York. ``There was some light jewelry buying.''
Gold futures for August delivery gained $7, or 0.8 percent, to $898.50 an ounce at 11:30 a.m. on the Comex division of the New York Mercantile Exchange. The metal reached a record $1,033.90 an ounce on March 17.
``Physical buyers are coming back into the market,'' said Matthew Zeman, a metals trader at LaSalle Futures Group in Chicago. ``People are thinking it's better to buy now at these discounted levels, than wait as it moves higher and have to buy at full price.''
Gold may rise this year as the currency market ``retains a bearish bias toward the dollar,'' Stephen Briggs, an analyst at Societe Generale in London, said in a report.
Before today, an index measuring the dollar against the euro, yen, pound and three other major currencies dropped 12 percent in the past year.
Societe Generale had forecast gold will average $1,025 an ounce this year, up from $701.68 in 2007.
Energy Costs
The metal extended gains after the energy costs rebounded. A surge in crude oil has spurred investor demand for gold as a hedge against increasing consumer prices, Zeman said.
Oil climbed after falling as much as 1.7 percent. Before today, gold futures climbed 35 percent in the past year as oil doubled, reaching a record $135.09 a barrel on May 22.
``The oil market has been determining the value of all of the commodities of late,'' said Leonard Kaplan, president of Prospector Asset Management in Evanston, Illinois. ``Oil influences the dollar and creates inflationary expectations.''
Hedge funds and other large speculators increased net-long positions, or bets on higher gold futures, by 5.2 percent in the week ended May 27, the highest since March 21, U.S. Commodity Futures Trading Commission data showed on May 30.
Silver futures for July delivery rose 9 cents, or 0.5 percent, to $16.955 an ounce. Before today, the metal climbed 13 percent this year, while gold gained 6.4 percent.
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