Monday, Sept 8, 2008
Gold rose the most in more than two weeks in London as the dollar fell and crude oil strengthened, increasing the allure of the metal as a hedge against further declines in the U.S. currency and inflation.
Gold has had a correlation of 0.69 to the euro-dollar exchange rate this year, up from 0.58 last year, Bloomberg data show. A figure of 1 would mean the two move in lockstep. The dollar fell for the first time in eight days against the euro after the U.S. government took over Fannie Mae and Freddie Mac.
“There’s increasing market uncertainty and even if Fannie Mae and Freddie Mac has been in the market for some time now, it’s definitely not bearish for gold,” said Walter de Wet, head of commodities research at Standard Bank Group Ltd. in Johannesburg.
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Gold for immediate delivery gained $8.82, or 1.1 percent, to $812.32 an ounce as of 7:53 a.m. in London. Gold futures for December rose $14, or 1.7 percent, to $816.80 an ounce in electronic trading on the Comex division of the New York Mercantile Exchange.
Crude oil climbed from a five-month low in New York as the approach of Hurricane Ike delayed the restoration of output in the Gulf of Mexico. Record oil prices spurred European inflation to 4 percent in July and contributed to the first quarterly contraction in the region’s economy since the euro was introduced almost a decade ago.
Demand for physical bullion is also buoying prices, De Wet said. Rand Refinery Ltd., the world’s largest gold refinery, last month said it ran out of South African Krugerrands after an “unusually large” order from a buyer in Switzerland.