Bloomberg News

Gold Reaches Six-Week High as Dollar Drops on Greek Debt Outlook

January 23, 2012

Jan. 23 (Bloomberg) -- Gold futures jumped to a six-week high as the dollar dropped against the euro, enhancing the appeal of the precious metal as an alternative asset.

The greenback fell to a two-week low against a basket of major currencies as a finance ministry official said talks on finalizing a Greek debt swap at today’s meeting of euro-area finance ministers were “substantive and constructive.” In the week ended Jan. 17, hedge funds and other money managers increased bets on a gold rally by the most in two months, U.S. Commodity Futures Trading Commission data showed on Jan. 20.

“People are expecting some positive outcome from all these discussions,” Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago, said in a telephone interview. “The weaker dollar is supporting gold.”

Gold futures for February delivery gained 0.9 percent to close at $1,678.30 an ounce at 1:35 p.m. on the Comex in New York, after touching $1,681.80, the highest for a most-active contract since Dec. 12. The precious metal has advanced 7.1 percent this month.

The EU agreed to ban crude-oil imports from Iran starting July 1 as discord mounted over the Persian Gulf nation’s nuclear program. Iran has threatened to block petroleum shipments through the Strait of Hormuz.

The EU said that the sanctions will also ban trade in precious metals and diamonds.

“The tension in Iran has been one of the factors supporting gold,” Afshin Nabavi, a senior vice president at MKS Finance SA, a metal refiner in Geneva, said in a telephone interview.

Silver futures for March delivery gained 1.9 percent to close at $32.27 an ounce on the Comex, after touching $32.775, the highest since Dec. 8.

On the New York Mercantile Exchange, platinum futures for April delivery rose 1.9 percent to $1,561.10 an ounce, the biggest gain in a week. Palladium futures for March delivery climbed 1.9 percent to $688.85 an ounce, after rising to $689, the highest for a most-active contract since Dec. 7.

--Editors: Steve Stroth, Millie Munshi

To contact the reporters for this story: Nicholas Larkin in London at nlarkin1@bloomberg.net; Debarati Roy in New York at droy5@bloomberg.net

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net


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