Post by AJrWennerGren on Jul 12, 2004 20:43:40 GMT -5
Top WorldwideGold Expected to Rise for a Second Straight Week, Survey Shows
July 12 (Bloomberg) -- Gold may rise for a second straight week on expectations that a U.S. government report Friday will signal inflation has accelerated, boosting the allure of precious metals as a hedge.
Twenty-six of 40 traders, investors and strategists surveyed by Bloomberg from New York to Sydney on Thursday and Friday advised buying gold this week.
Ten recommended selling and four said investors
should hold bullion.
Gold rose to a two-month high of $409.60 an ounce in New York last week as the dollar fell against the euro, reducing the metal's cost for buyers in Europe. U.S. consumer prices excluding food and energy probably rose 1.9 percent in June from a year earlier, up from 1.7 percent in May and the biggest gain since January last year, according to five economists surveyed by Bloomberg News.
``I would not be surprised if gold tested the $420-per-ounce level'' this week, said Ron Cameron, an analyst at Ord Minnett Ltd. in Sydney. ``
It certainly has momentum in the very short term.''
Gold for August delivery rose $9.20, or 2.3 percent, to $407.90 last week on the Comex division of the New York Mercantile Exchange. Gold has climbed from a six-month low of $371.30 an ounce on May 10.
The consumer price index in June probably rose 0.2 percent from the previous month, the Bloomberg survey showed.
In May, the index rose 0.6 percent from April, the biggest gain since January 2001, as costs for gasoline surged and dairy products increased the most since 1946. The Labor Department is set to release
the report on Friday.
`More Inflation'
``This metal is telling us there is more inflation out there than some are forecasting,'' said William O'Neill, a partner at Logic Advisors LLC, a commodity consulting company based in Upper Saddle River, New Jersey. ``The weak dollar has clearly been a help'' for gold, he said.
Traders such as Alexander Zumpfe of Dresdner Kleinwort Wasserstein said the U.S. currency will continue to fall from last week's two-month low against the euro, further bolstering the prospects for gold.
The Federal Reserve said June 30 it will stick to its plan to raise interest rates at a ``measured'' pace after boosting its target rate for overnight loans between banks to 1.25 percent from a four-decade low
of 1 percent.
``We think the coming months will only bring moderate month- over-month rises in inflation,'' said Zumpe, who is based in Frankfurt. ``
This should support the Fed in its `measured pace' approach and see the U.S. dollar resume its downtrend.'' Gold may reach $414.50, ``
our next upside target,'' he said.
Terrorist Concern
Gold also got a boost last week from concern about the risk of escalating violence in Iraq and terrorist attacks in the U.S. Homeland Security Secretary Tom Ridge said the risk of attacks has ``increased,'' after the U.S. received information that suggests al-Qaeda
may try to disrupt the November presidential
election.
Gold futures jumped 4.4 percent on Sept. 14, 2001, as trading resumed following al-Qaeda's Sept. 11, 2001, attacks in New York and Washington.
``The environment for gold hasn't been this good for 20 years,'' said Jonathan Battershill, an analyst at brokerage Hartleys Ltd. in Perth.
The U.S. trade deficit in May probably held at a record $48.3 billion, according to the median of 53 forecasts in a Bloomberg News survey of economists.
Dollar at Risk
A rising gap between imports and exports puts the dollar at risk because the U.S. needs to attract more and more foreign capital to finance it, according to Richard Berner, chief U.S. economist at Morgan Stanley in New York. The Commerce Department releases the statistics on trade in goods and services at 8:30 a.m.
in Washington on Tuesday.
``The gold price has seen an excellent run as the dollar has trended weaker,'' said Patrick Chidley, an analyst at Barnard Jacobs Mellet USA in New York. ``
We are still of the view that the Fed's attempts to prevent inflation are going to struggle as it will be difficult to make decisive moves to raise interest rates in the face of a fragile economic recovery and record consumer and total debt levels.''
Hedge funds last week reduced their holdings of gold futures for the first time in three weeks, a report from the U.S. Commodity Futures Trading Commission in Washington showed Friday.
Funds and other large speculators bought 31,403 more gold futures on the Comex than they had sold as of Tuesday, down 22 percent from 40,167 a week earlier, the commission said in a weekly report.
To contact the reporter on this story:
Claudia Carpenter in New York ccarpenter2@bloomberg.net
To contact the editor responsible for this story:
Steve Stroth at sstroth@bloomberg.net.