Nov. 1 (Bloomberg) — Gold prices may rise for a second week on speculation of increased demand from investors seeking an alternative asset to U.S. stocks, bonds and the dollar, a Bloomberg survey showed.
Twenty-one of 52 traders, investors and strategists surveyed on Oct. 28 and Oct. 29 from Sydney to New York urged investors to buy gold this week. Thirteen advised clients to sell, and 18 recommended no action on the precious metal.
Gold rose 3.5 percent in October, outperforming a 1.4 percent rise in the Standard & Poor’s 500 Index as the dollar fell 2.8 percent against the euro. Gold’s rally shows some investors, including in the Middle East, see the metal as a better bet than U.S. assets, said Pierre Lassonde, president of Denver-based Newmont Mining Corp., the world’s largest gold producer.
“The Arabs are not coming to the U.S.,” Lassonde, 57, said in an interview last week. “They’re not putting money in the U.S. What they are buying is real estate in Beirut. They’re buying euros. They’re diversifying outside of currencies and they’re buying gold. They have a great affinity to gold.”
Lassonde said he was “very well received” on a trip to Abu Dhabi and Kuwait three weeks ago to drum up interest in the Denver-based company’s shares.
Gold futures for December delivery rose 0.9 percent last week to $429.40 an ounce on the Comex division of the New York Mercantile Exchange, the seventh gain in eight weeks. Prices reached a 15-year high of $433 on April 1. A futures contract is an obligation to buy or sell a commodity.
Gold and Dollar
The majority of gold investors and analysts correctly forecast the market’s direction 15 times in the 28 weeks since the start of the Bloomberg survey.
Gold’s 0.8 percent surge on Friday came as the dollar fell against the euro. The dollar’s 21 percent decline against a basket of currencies since the start of U.S. President George W. Bush’s term will probably be prolonged this week, according to a separate Bloomberg survey.
About 90 percent of the drop in the dollar is responsible for the higher gold price, and the rest is due to increased jewelry demand, Lassonde said. “Jewelry sales have gone up in the last six months,” he said. Jewelers are the biggest users of gold.
Gold would rise if Senator John Kerry wins the U.S. presidential election on Nov. 2, and fall if Bush stays in office, said Rajini Panicker, head of research at Mumbai-based Refco Commodities India Pvt. A Kerry win would be negative for the dollar, he said.
Kerry, Stocks, Dollar
“If Kerry wins, look for the equity market to tank, along with the dollar,” said Leonard Kaplan, president of Evanston, Illinois-based Prospector Asset Management, who says gold is a sell this week. “The gold market will not be able to penetrate significant technical resistance at the $430 to $432 price level.”
Gold reached a six-month high of $432 on Oct. 25, buoyed by concern the U.S. won’t attract enough capital to fund a shortfall in trade and investments, reducing the value of the dollar.
“The outcome of the election is unlikely to change that view since it shouldn’t change structural problems” such as the U.S. trade and federal budget deficits, said Alexander Zumpfe, a Frankfurt-based analyst at Dresdner Kleinwort Wasserstein.
Last week, Newmont raised its forecast of bullion prices to trade between $400 and $475 an ounce over the next 12 to 15 months, up from a previous forecast of $380 to $450.
Newmont raised its forecast because the record U.S. current account deficit has widened more than expected, requiring the dollar to fall even more, Lassonde said. The shortfall was a record $166.2 billion in the second quarter.
`Dollar Will Fall’
“At the end of the day, the dollar will fall more against the euro and a huge amount against the Asian currencies,” Lassonde said.
Investor demand may get a boost as Gold Bullion Securities Ltd. plans to offer gold-backed shares on the Johannesburg stock exchange on Nov. 2 under the name of NewGold Issuer Ltd. Each share is equivalent to one hundredth of an ounce of gold.
Gold Bullion Securities sold an additional 100,000 ounces of gold-backed shares on the London Stock Exchange last week, to bring assets under management up 25 percent in the past month to about $800 million. Each share under that program is equal to a tenth of an ounce.
“We see good physical demand out of India,” said Bernard Sin, chief precious metals trader at MKS Finance SA in Geneva. “We also see a good amount of scrap supply from the Far East.”
Hedge-fund managers and other large speculators increased their net-long position in New York gold futures in the week ended Oct. 26, according to U.S. Commodity Futures Trading Commission data.
Speculative long positions, or bets prices will rise, outnumbered short positions by 127,895 contracts on the Comex, the Washington-based commission said. Net-long positions rose by 6,981 contracts, or 6 percent, from a week earlier.
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