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Gold price may drop after rally

12 October 2009 13:11 (UTC +04:00)

Bakuâ€“ APA-Economics. Gold, little changed in London today, may decline as the dollar advanced against global currencies and some investors sold after the metalâ€™s jump to a record last week, Bloomberg reports.

The Dollar Index, a six-currency gauge of the greenbackâ€™s value, strengthened for a second day, as traders judged the measureâ€™s drop to an almost 14-month low on Oct. 8 was overdone amid speculation the Federal Reserve will withdraw stimulus measures. Bullion reached an all-time high of $1,061.55 an ounce on Oct. 8 and has advanced 19 percent this year.

Immediate-delivery bullion added $1.35, or 0.1 percent, to $1,050.60 an ounce by 9:20 a.m. local time. The commodity gained 4.6 percent last week, the seventh weekly increase in eight. December gold futures were 0.3 percent higher at $1,051.60 an ounce on the New York Mercantile Exchangeâ€™s Comex division.

Fed Policy
Fed Chairman Ben S. Bernanke said last week that the U.S. central bank was ready to â€œtightenâ€ monetary policy. The Fed has kept its benchmark lending rate between zero and 0.25 percent since December to counter the effects of the recession.

Twelve of 19 traders, investors and analysts surveyed by Bloomberg, or 63 percent, said bullion would rise this week. Six forecast lower prices and one was neutral.
Hedge-fund managers and other large speculators increased their bets on rising New York futures to a record in the week ended Oct. 6, the U.S. Commodity Futures Trading Commission said last week. Net-long positions gained by 8,282 contracts, or 3.6 percent, to 239,668 contracts.
Among other precious metals, silver rose as much as 1.4 percent to $17.96 an ounce, the highest since July 2008, and was last up 0.4 percent at $17.785. Platinum lost 0.3 percent to $1,330.10 an ounce and palladium was 0.6 percent higher at $322 an ounce.