The dollar fell as traders increased bets that the Federal Reserve will lower U.S. interest rates to avoid a recession. Gold has gained 9 percent this year and the dollar has fallen more than 2 percent against the euro, to a seven-week low.
``We're in a falling rate environment. I think that works in gold's favor,'' Richard Urwin, London-based head of asset allocation at BlackRock Investment Management, said in an interview with Bloomberg Television. ``We're probably in an environment in which on average the dollar is going to depreciate. Gold is a good hedge against it.''
The metal for immediate delivery rose $12.31, or 1.4 percent, to $907.71 an ounce at 1:38 p.m. in London. It earlier reached $914.30.
Gold futures for February delivery rose $11.60, or 1.3 percent, to $909.30 an ounce at 8:38 a.m. on the Comex division of the New York Mercantile Exchange. The price earlier reached $915.90, the highest ever for a most-active contract.
Twenty-three of 29 traders, investors and analysts surveyed by Bloomberg from Mumbai to New York on Jan. 10 and Jan. 11 advised buying gold this week. Five said sell, and one was neutral.
``The market is still extremely bullish,'' said James Moore, an analyst at TheBullionDesk.com in London. ``With the U.S. potentially cutting interest rates while those in Europe stay firm, the dollar looks set to add additional upside momentum.''
Gold Bets
Hedge-fund managers and other large speculators increased bets on higher New York gold futures, to a record net 205,404 contracts on the Comex as of Jan. 8, figures from the U.S. Commodity Futures Trading Commission on Jan. 11 showed. Net long positions were up from 199,438 contracts from a week earlier.
Fed funds futures contracts on the Chicago Board of Trade show 100 percent odds the Fed will cut its 4.25 percent target rate for overnight bank loans to 3.75 percent at its Jan. 30 meeting. The odds have risen from 66 percent a week ago.
Demand for gold will be less affected by a global slowdown than silver, platinum and palladium, said Walter de Wet, head of commodity research in Johannesburg at Standard Bank Group Ltd., Africa's largest lender.
Industrial uses for gold, such as dentistry and electronics, made up 15 percent of total demand in 2006 compared with more than 50 percent for platinum and 47 percent for silver, according to estimates by London-based research company GFMS Ltd. Jewelry accounts for almost 60 percent of gold consumption.
ETF Gold
``The investment component of demand for all of these precious metals is dominating,'' De Wet said. ``We're likely to see an increase in all of these metals but gold is probably going to outpace.'' The gains may last until the second half of this year, he said.
Assets in the StreetTracks Gold Trust, the world's biggest exchange-traded fund backed by gold, are up 2.2 percent this year at a record 641.81 metric tons.
Gold also gained as equities declined. The Standard & Poor's 500 Index has fallen for three weeks, losing 4.6 percent, the worst start since 1982, according to Bloomberg data.
``People are looking at precious metals as principally a safe haven while they ride out a correction in equity markets,'' Peter McGuire, managing director at Commodity Warrants Australia Ltd., said by telephone from Sydney today.
The euro traded as high as $1.4915 today. It reached a record $1.4967 on Nov. 23.
Gold has had a correlation of 0.71 against the euro-dollar exchange rate in the past three months, compared with 0.67 in the previous three months. A reading of 1 would mean the two moved in lockstep.
Inflation-Adjusted Gold
Adjusted for inflation, gold is still below its all-time high. The metal is trading at $433.85 an ounce, adjusted for the U.S. urban consumers price index.
Silver for immediate delivery advanced 11.5 cents, or 0.7 percent, to $16.34 an ounce after earlier gaining to $16.60, the highest since November 1980.
Platinum for immediate delivery gained $13, or 0.8 percent, to $1,577.50 an ounce, after earlier touching a record $1,592. The precious metal is used in products such as jewelry and autocatalysts.
Macquarie Group Ltd. raised its forecast for the average platinum price this year by 16 percent to $1,475 an ounce. It also increased its 2009 and 2010 estimates by 15 percent.
Palladium for immediate delivery advanced $2, or 0.5 percent, to $380 an ounce.
Macquarie cut its 2008 palladium forecast by 12 percent to $350 and its 2009 estimate by 14 percent to $365.
The morning platinum ``fixing'' price used by some mining companies to sell their production gained $24 to $1,589 an ounce, the highest ever. The palladium fixing rose $6 to $382, the highest since May 17, 2006.
Following are technical gauges for gold:
20-day moving average 844 100-day moving average 778 200-day moving average 722
14-day relative strength index 77.49
Fibonacci Start End 50% 38.2%
