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Gold Advances in Asia on Expectation Dollar May Weaken on Data
By Feiwen Rong
June 3 (Bloomberg) -- Gold rallied for the third day in Asia on expectation that the U.S. dollar may fall as the U.S. economic data releases may show the economy is stagnating, boosting the appeal of the bullion as alternative investment.
Gold has gained 33 percent in the past year as the dollar declined 15 percent against the euro, boosting the appeal of the precious metal as an alternative asset. The dollar has lost 12 percent since mid-September when the U.S. central bank began cutting the target lending rate from 5.25 percent. Federal Reserve policy makers will hold their next meeting on June 25.
``Gold should rise from a drop in the U.S. dollar and a choppy to firmer oil price,'' said Mark Pervan, analyst in Melbourne at Australia & New Zealand Banking Group Ltd., in a report today. ``The U.S. economic calendar looks like a minefield of disappointment, which should put renewed downward pressure on the U.S. dollar.''
Bullion for immediate delivery gained as much as $3.63, or 0.4 percent, to $895.05 an ounce before trading at $894.40 at 1:54 p.m. in Singapore. Silver advanced 0.5 percent at $16.905 an ounce at the same time.
The dollar may fall before a government report today that will probably show orders to U.S. factories fell 0.1 percent in April, after rising 1.3 percent the previous month, according to the median forecast of 65 economists surveyed by Bloomberg News. There's also a 98 percent chance policy makers will hold borrowing costs at 2 percent at the June 25 meeting.
Futures on the Chicago Board of Trade show a 65 percent chance the Federal Reserve will raise the target rate for overnight lending between banks by at least a quarter-percentage point in December.
Oil Lower
The European Central Bank will keep its main refinancing rate at a six-year high of 4 percent until at least February, according to the median forecast of 31 economists surveyed by Bloomberg News.
The dollar was little changed at $1.5552 against the euro at 1:56 p.m. Singapore time, while crude oil traded 0.3 percent lower at $127.39 a barrel in New York. Crude's rise to a record $135.09 on May 22 had prompted buying of gold last month as a hedge against inflation.
``The oil price is a harder call, but still remain high enough to fuel inflation concerns,'' said Pervan at the Australia & New Zealand Banking Group.
Still, ``gold has encountered resistance at the $900 level and investors are waiting on the sidelines trying to see how the dollar might behave,'' Ronald Leung, director at Lee Cheong Gold Dealers (Hong Kong) Ltd., said by phone from Hong Kong today.
Gold for August delivery was little changed at $897.60 an ounce in after-hours electronic trading on Comex at 1:56 p.m. Singapore time.
Gold for April 2009 delivery gained 17 yen, or 0.6 percent, to 3,021 yen a gram ($898 an ounce) on the Tokyo Commodity Exchange at 2:57 p.m. local time, while gold for December delivery traded in Shanghai gained 1.3 percent to 199.18 yuan a gram ($894 an ounce) at the same time.
To contact the reporter for this story: Feiwen Rong in Singapore at