Gold Surges Above $700 as Investors Seek to Hedge Weaker Dollar May 17 (Bloomberg) -- Gold rose as much as 2.5 percent in Asia, rising above $700 an ounce, as a weaker dollar made the precious metal more attractive as an alternative investment.
The dollar is trading near its lowest in eight months against the yen, and at a one-year low versus the euro after weaker-than expected U.S. producer price and building reports yesterday. A weaker dollar makes bullion more attractive compared with other U.S.-dollar denominated assets like stocks.
``The market is rising today over the weaker dollar,'' said Alastair McIntyre, head of marketing at ScotiaMocatta, in Hong Kong. ``There's still a lot of funds interest in the market, as there's not a lot of returns in other markets.''
Gold for immediate delivery rose as much as $17.10, or 2.5 percent, to $707.50 an ounce. It traded at $705.27 at 11:16 a.m. Mumbai time. Gold fell 5.2 percent on May 15, tumbling below the $700 an ounce level, as some investors sold after the bullion had surged to 26-years high this year.
The dollar bought 109.53 yen at 11:18 a.m. in Mumbai, from 109.76 in late New York yesterday. It traded at 1.2874 against the euro, from $1.2858 yesterday.
The U.S. government said yesterday producer prices excluding food and energy rose 0.1 percent for a second month, less than forecast. Builders in the U.S. broke ground on the fewest homes in 17 months in April, a separate report showed. Investors are at their most bearish on the dollar in five years, according to a Merrill Lynch & Co. report yesterday.
Gold may rise to $800 an ounce this year as a store of value against declining currencies, Ian Telfer, chief executive officer of GoldCorp Inc., Canada's second-largest gold producer, said yesterday.
`Gradual Climb'
``We are in a very early stage of this gold price increase,'' said Telfer. The main support for a gain in bullion prices ``will be people looking for ways to preserve the value of what they have.''
Gold for June delivery on the Comex division of the New York Mercantile Exchange rose as much as $15.00, or 2.2 percent, to $707.90 an ounce in after-hours electronic trade. It traded at $705.60 at 11:19 a.m. Mumbai time.
``We will witness a gradual climb once gold climbs back to $715 as fresh funds are expected at those levels,'' Kishore Narne, head of research at Mumbai-based Anand Rathi Commodities, said today. ``The bullish trend is intact.''
In India, the world's biggest consumer, gold prices for June delivery rose 123 rupees, or 1.2 percent, to 10,507 rupees per 10 grams, or 32,676 rupees ($720) per ounce, at 11:22 a.m. on the Multi Commodity Exchange of India Ltd. in Mumbai.
