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Gold Rises in Asia as Drop Lures Jewelry Buying, Dollar Falls

By Feiwen Rong

March 25 (Bloomberg) -- Gold rose in Asia after the biggest weekly decline in prices in 25 years enticed buying from jewelers and as the dollar fell on concern that U.S. consumer confidence dropped to a five-year low.

Bullion often moves in the opposite direction to the dollar, which declined the most against the euro in two weeks today. Gold lost 8.3 percent last week as the dollar gained and amid concern that a U.S.-led slowdown in the global economy will reduce consumption of raw materials. Gold traded as low as $905.53 an ounce on March 20.

``Physical demand from jewelers has recovered a little bit at this price level,'' Dick Poon, manager of precious metals trading desk at Heraeus Ltd., said by phone from Hong Kong today. ``The market is trading in very thin volume and we might see prices at this level consolidating for a while.''

Gold traded as high as $927.20 an ounce today, 10 percent down from the record $1,032.70 reached March 17. Bullion for immediate delivery gained $10.38, or 1.1 percent, to $925.68 an ounce as of 3:49 p.m. in Singapore. Silver for immediate delivery gained 2.2 percent to $17.42 an ounce.

Concern that equities may decline amid weaker economic growth remained, said Poon. ``People are worrying about other markets and if gold can stabilize around this level, then we might see it move higher later.''

The Conference Board's confidence index declined to 73.5 in March from 75 in February, according to the median estimate of 61 economists surveyed before today's report. The figure would be the lowest since March 2003.

Crude Oil

Gold fell earlier as a drop in crude oil reduced the appeal of bullion as a hedge against inflation.

The UBS Bloomberg Constant Maturity Commodity Index last week posted its biggest weekly drop since the data started in October 1997. Oil in New York fell for a fourth day today on concern that the slowing U.S. economy will cut fuel demand in the world's biggest energy-consuming country.

Crude oil for May delivery declined 53 cents, or 0.5 percent, to $100.33 a barrel at 3:51 p.m. Singapore time in after-hours trading on the New York Mercantile Exchange. Oil is still up 59 percent from a year ago.

Gold for April delivery rose 0.7 percent to $925.40 an ounce in after-hours electronic trading on the Comex division of the New York Mercantile Exchange at 3:52 p.m. Singapore time. The contract fell 8 percent last week, its biggest weekly loss since 1990.

Open Interest

Gold options traded on Comex, and probably some options in the over-the-counter market expire this week, analysts at Casey Research LLC wrote in a report today. ``It's also month end and the end of the first quarter. Expect anything between now and then,'' the analysts wrote.

Hedge-fund managers and other large speculators reduced their net-long position in New York gold futures in the week ended March 18, according to U.S. Commodity Futures Trading Commission data. Net positions fell by 4,334 contracts, or 2.2 percent, from a week earlier.

The change ``was nothing that would take your breath away,'' the Casey Research report said.

Gold for February 2009 delivery on the Tokyo Commodity Exchange gained 53 yen, or 1.8 percent, to 3,030 yen a gram ($938 an ounce) at 5:13 p.m. local time.

June-delivery gold on the Shanghai Futures Exchange gained 0.6 percent to settle at 209.59 yuan a gram ($924 an ounce).

To contact the reporter for this story: Feiwen Rong in Singapore at [email protected]
Last Updated: March 25, 2008 04:19 EDT