Sun, Aug 19, 2001 - Page 10 News List

Gold rallies as weaker US dollar boosts bullion sales

BLOOMBERG , NEW YORK

Gold rose to its highest price in almost three months as the dollar weakened, making the metal cheaper for buyers overseas.

The dollar fell close to a five-month low against the euro, marking a sixth week of declines. Europe is the second-largest consumer of gold for fabrication into jewelry, the metal's largest use.

"A weaker US dollar means you'll see a lower gold price in non-US currencies, which helps gold demand," said Kamal Naqvi, an analyst at Macquarie Bank in London. "Gold reflects the dollar more than any other commodity."

Gold for October delivery rose US$4.10, or 1.5 percent, to US$280.50 an ounce on the Comex division of the New York Mercantile Exchange. It was the highest closing price since May 23.

Prices, up 1.9 percent this week, have climbed 10 percent after falling close to a 22-year low in February. The rally accelerated after prices rose above US$278 an ounce, triggering pre-arranged buy orders from speculators, traders said.

Jewelers account for about four-fifths of the US$35 billion gold market, according to Gold Fields Mineral Services Ltd.

The dollar lost 2.6 percent against the euro and 1.4 percent against the yen this week amid speculation that overseas investors will trim their holdings in US financial assets. The International Monetary Fund said Tuesday that the dollar is poised for "a sharp depreciation" because the US current account gap, the widest measure of trade, is too large.

Since early June, a month before the dollar climbed to a 15-year high against a basket of its major trading partners' currencies, business groups have lobbied President George W. Bush's administration to seek a weaker dollar.

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