Gold Gains on Weak Dollar; Silver Reaches Highest Since August

By Jason Scott

June 3 (Bloomberg) -- Gold advanced in Asia as dollar weakness increased the metal’s appeal as an alternative to U.S. currency-denominated assets. Silver climbed to the highest in almost 10 months.

Bullion extended yesterday’s gain after the dollar dropped to the lowest since Dec. 18 against a basket of six major currencies. The dollar declined for a second day against the yen on concern nations are considering alternatives to the world’s main reserve currency, spurring investors to sell the greenback.

“With the inverse relationship between gold and the buck back in vogue and the year’s steepest monthly dollar decline in May, gold prices are poised to attack the psychological $1,000 level this week,” said Ralph Preston, a Heritage West commodity analyst in San Diego.

Gold for immediate delivery gained 0.5 percent to $986.52 an ounce at 1:45 p.m. in Singapore. Silver jumped 1.1 percent to $16.135 an ounce, extending yesterday’s 2.4 percent rise. The metal earlier reached $16.20, the highest since Aug. 8.

Silver has outpaced gold this year. An ounce of gold now buys about 61 ounces of silver, down from a peak of 84.4 ounces on Oct. 10.

Gold holdings in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, were unchanged at a record 1,134.03 metric tons yesterday. The fund’s holdings have increased 45 percent this year.

Gold for August delivery, the most-active contract on the Comex division of the New York Mercantile Exchange, added 0.3 percent to $987.70. The contract reached $990.20 on June 1, the highest since Feb. 24.

Economic Outlook

U.S. business activity contracted at a faster pace than forecast in May, according to the Institute for Supply Management-Chicago Inc. That dented investor speculation that the first simultaneous recessions in the U.S., Europe and Japan since World War II may be ending.

“The crisis will continue on balance to be good for gold as long as it leads to a positive environment for investment demand,” GFMS Chairman Philip Klapwijk said. “It is the case at the moment and will continue to be the case over the rest of 2009.”

Among other precious metals for immediate delivery, platinum rose as much as 0.5 percent to $1,254.75 an ounce, the highest intraday price since Sept. 23, before trading at $1,252.50 at 1:43 p.m. Singapore time. Palladium gained 0.1 percent to $251 an ounce.