Gold, Silver Futures Advance on Outlook for U.S. Equities
By Pham-Duy Nguyen
Aug. 31 (Bloomberg) -- Gold rose the most in a week on speculation a rally in U.S. equities will boost investment demand for the precious metal. Silver also gained.
U.S. stocks rallied after President George W. Bush announced a plan to help curb mortgage defaults and stem losses in credit markets. Investment demand in the StreetTracks Gold Trust, an exchange-traded fund backed by bullion, remains at a record 515 metric tons. Gold is up 6.8 percent this year.
``Gold is simply following stocks higher because of the Bush bailout,'' said Leonard Kaplan, president of Prospector Asset Management in Evanston, Illinois.
Gold futures for December delivery rose $7.10, or 1.1 percent, to $681 an ounce at 11:32 a.m. on the Comex division of the New York Mercantile Exchange. A close at that price would be the biggest one-day gain since Aug. 24. The metal is up 0.5 percent this week, heading for the second straight weekly gain.
Silver futures for December delivery rose 19 cents, or 1.6 percent, to $12.15 an ounce on the Comex. Before today, the metal had dropped 7.5 percent this year.
The Dow Jones Industrial Average gained as much as 1.1 percent. Gold has often moved in tandem with equity markets this year. Investors have sold gold to raise cash as equities plunged and purchased the metal when stocks rallied, analysts said.
Subprime Losses
Gold reached a six-week low on Aug. 16 as losses widened in U.S. subprime mortgages, sending stocks lower.
``Gold has traded in stride with equities,'' said Matt Zeman, a metals trader at LaSalle Futures Group in Chicago. ``Equities are moving higher and stabilizing so that should be supportive of gold.''
Gold also gained on a weaker dollar. Five of the past bear markets for the dollar have pushed gold prices higher. The U.S. currency today fell to a three-week low against the euro before rebounding.
``The dollar is going to be the primary driver for gold,'' Zeman said.
The euro reached a record $1.3852 on July 24. It traded as high as $1.3719 today. Investors concerned about losses in the subprime market have moved into Treasuries, helping to boost the value of the dollar.
To contact the reporter on this story: Pham-Duy Nguyen in Seattle at [email protected] .
