Gold Trades Within 0.2% of Record on Fed Rate Cut Speculation
By Danielle Rossingh
Jan. 28 (Bloomberg) -- Gold traded within 0.2 percent of a record in London on speculation the U.S. Federal Reserve will lower interest rates again to revive economic growth, increasing the metal's appeal as an alternative investment.
The dollar has declined against 13 of the 16 most-active currencies since the Federal Reserve lowered rates last week to prevent credit-market losses from causing a recession. Futures traders are increasing bets the Fed will agree on a further cut at a Jan. 30 meeting. Gold also climbed as power was disrupted for a fourth day in South Africa, hampering production.
``The market is looking for any reason to buy; it is moving at the moment on the U.S. dollar,'' Mark Pervan, senior commodity strategist at Australia & New Zealand Banking Group Ltd., said in an interview from Melbourne on Bloomberg Television today. A rate cut would put ``downward'' pressure on the dollar, ``and that is always good for gold prices.''
Gold for immediate delivery climbed as much as $7.69, or 0.8 percent, to $921.64 an ounce. That's within 0.2 percent of the record $923.73 reached Jan. 25. Gold traded at $918.86 as of 11:43 a.m. in London.
Silver for immediate delivery fell 5 cents, or 0.3 percent, to $16.43 an ounce.
Gold may rise for a second consecutive week, according to a survey by Bloomberg News. Twenty-two of 29 traders, investors and analysts surveyed on Jan. 24 and 25 recommended buying gold. Four said sell, and three were neutral.
The metal may jump to as high as $1,000 an ounce within ``a couple of months,'' Pervan forecast.
Borrowing Costs
The cost of borrowing gold for one year is 0.4248 percent, compared with an average of 0.26917 percent in the past 12 months, according to data compiled by Bloomberg. Rates reflect forecasts about the amount of metal available for borrowing.
In London, the 10:30 a.m. gold ``fixing'' rate used by some mining companies to price their sales dropped $4.75 to $916.50 an ounce. The platinum fix rose $15 to $1,664 an ounce.
Platinum for immediate delivery in London traded within 0.6 percent of the record $1,701 an ounce reached Jan. 25. Palladium slumped 0.7 percent to $378.
Anglo Platinum Ltd. and Impala Platinum Holdings Ltd., the world's biggest platinum producers, shut most of their mines in South Africa today as the nation's power shortage worsened.
Rhodium also advanced because of the mine closures in South Africa, the biggest supplier of the metal used in autocatalysts.
Rhodium for immediate delivery rose $100, or 1.4 percent, to $7,180 an ounce, the highest since at least 2001, according to prices from Johnson Matthey Plc on Bloomberg.
Rhodium Production
South Africa accounts for about 84 percent of global supplies of rhodium, which is usually mined with platinum. South Africa is the world's biggest platinum producer and ranks second, after China, for gold output.
Gold miners AngloGold Ashanti Ltd. and Gold Fields Ltd. kept their South African mines shut. State utility Eskom Holdings Ltd. told mining companies it could only provide enough power for maintenance and safety procedures.
AngloGold expects power supply to increase later this week, allowing a ``phased return'' to normal output.
``We are now concerned that the shortfall in production will need to trigger a structural change in the platinum market,'' John Reade, a precious metals analyst with London-based UBS AG, said in an e-mailed note today.
The market may have a supply shortfall of ``more than'' 700,000 ounces a year for the next three years, UBS said.
UBS raised its one- and three-month forecast for platinum prices to $1,800 an ounce, from a Jan. 4 forecast of $1,600.
To graph technical gauges for gold: Moving Averages Relative Strength Index Fibonacci Back Test Technical Gauges
To contact the reporter for this story: Danielle Rossingh in London at drossingh@bloomberg.net
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