By Nicholas Larkin and Pham-Duy Nguyen
Nov. 9 (Bloomberg) -- Gold futures climbed to a record for the second straight session as the slumping dollar spurred demand for the precious metal as an alternative investment.
The greenback slid to a 15-month low against a basket of six major currencies after the Group of 20 industrial nations maintained economic stimulus measures. Before today, gold climbed 24 percent this year, while the dollar dropped 6.8 percent. Last week, the Federal Reserve held U.S. interest rates at historic lows.
“It looks like gold will carve out new highs until further notice,” said Michael Guido, a director of hedge-fund sales at Macquarie Capital USA Inc. in New York. “The Fed made it quite clear that rates are going nowhere. The dollar is sinking. The bullish holders of gold are adding positions when the market makes a new high.”
Gold futures for December delivery rose $12.40, or 1.1 percent, to $1,108.10 an ounce at 12:15 p.m. on the Comex division of the New York Mercantile Exchange. Earlier, the price reached a record $1,111.70. The metal was up for the sixth straight session, the longest rally since March 2008.
The dollar dropped 0.6 percent last week against the currency basket as the Fed kept its benchmark interest rate at zero percent to 0.25 percent, where it was set in December. Gold is heading for the ninth straight annual gain.
‘All Dollar-Driven’
“You’re getting rotational support into gold,” Guido said. “It’s all dollar-driven.”
Gold probably will top $1,500 within the next 18 months, Bank of America Merrill Lynch said in a report distributed today. It cited moves by some central banks to hedge against declines in currencies including the dollar, euro and yen.
“With G-10 fiat currencies suffering from a credibility problem, a move toward hard assets like gold is likely,” the bank said.
India’s central bank last month bought 200 metric tons of bullion from the International Monetary Fund for $6.7 billion. The country now holds 557.7 tons in its reserves, the 10th- largest stockpile by nation after Russia’s 568.4 tons, according to data from the producer-funded World Gold Council. The IMF agreed in September to sell 403.3 tons of gold as part of a plan to shore up its finances.
“India’s surprise purchase was bullish in two ways: quickly removing half of the IMF’s announced sales, as well as raising the chance that the entire remaining supply could be sold off-market, with China still the most obvious potential purchaser,” Morgan Stanley said today in a report.
Scrap Sales
Scrap sales haven’t increased in tandem with price, said Afshin Nabavi, a senior vice president at bullion refiner MKS Finance SA in Geneva.
“You’d expect at these levels there would be tons and tons, but it’s not the case,” Nabavi said.
Gold’s gains may be limited as some investors sell the metal following last week’s 5.3 percent advance, the most since April.
The 14-day relative strength index for gold futures topped 70, signaling that prices may retreat, some analysts said.
Silver futures for December delivery rose 32 cents, or 1.8 percent, to $17.695 an ounce. Earlier, the price reached $17.78, a two-week high.
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