Bloomberg
Gold Rises on Demand for Currency Alternative; Palladium Jumps
March 05, 2010, 2:37 PM ESTBy Pham-Duy Nguyen
March 5 (Bloomberg) -- Gold futures rose, capping a weekly gain, on investment demand for the metal as an alternative to holding currency. Palladium jumped to a 20-month high.
The dollar fluctuated between gains and losses against a six-currency index. The euro rebounded after falling as much as 0.4 percent against the greenback as Greek Prime Minister George Papandreou began meetings with European Union leaders about the nation’s fiscal plight. Gold priced in euros reached a record.
“Investors want to hold a currency that’s going to maintain its value,” said Frank Lesh, a trader at FuturePath Trading LLC in Chicago. “Gold is a part of the currency crosses now. The international currency is gold.”
Gold futures for April delivery rose $2.10, or 0.2 percent, to $1,135.20 an ounce on the Comex division of the New York Mercantile Exchange. The metal gained 1.5 percent this week.
Greek labor-union demonstrators shut down transportation today and attempted to occupy the parliament. The government passed 4.8 billion euros ($6.5 billion) of budget cuts, including wage reductions.
The euro may fall “massively” should investors test the EU’s strategy to support Greece, BNP Paribas SA said in a report.
Gains in gold, which often rises when the dollar falls, may be limited as the U.S. currency strengthens, Deutsche Bank AG said.
‘Excessively Rich’
“The gold price is trading at excessively rich levels of valuation when measured on a foreign-exchange basis,” the bank said in a report. “We are skeptical of the ability of the gold price to rally in an environment where the dollar is strengthening and inflows into physically backed ETFs have stalled.”
Investment in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, fell 1.6 percent this year to 1,115.51 metric tons as of yesterday. In 2009, investment in the fund surged 45 percent.
Palladium futures for June delivery gained $13.50, or 2.9 percent, to $476.70 an ounce. Earlier, the price reached $479.10, the highest level since June 23, 2008.
The most-active contract rose for the seventh straight session, the longest rally since October.
Platinum futures for April delivery fell $4.50, or 0.3 percent, to $1,579.10 an ounce. This week, the price climbed 2.5 percent.
The metals are used in jewelry and pollution-control devices in cars.
Silver futures for May delivery rose 20.6 cents, or 1.2 percent, to $17.382 an ounce. This week, the price jumped 5.2 percent, the fourth straight advance.
--With assistance from Nicholas Larkin in London and Ben Levisohn and Inyoung Hwang in New York. Editors: Patrick McKiernan, Ted Bunker
To contact the reporter on this story: Pham-Duy Nguyen in Seattle at pnguyen@bloomberg.net.
To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net.
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