Gold Climbs As Lower Prices Attract Investment Funds COMMODITIES MARKETPLACE By Bloomberg
Posted on: Tuesday, 14 March 2006, 09:00 CST
By Julie Tay
Gold prices rose Monday after a big weekly drop, as buying from funds seeking commodity returns unavailable in equity or bond markets came back to the market.
"Funds have been actively buying on dips," said Yu Yingxi at Barclays Capital.
Commodity holdings by fund investors will double to $120 billion this year, Standard & Poor's estimates.
Gold fell 4.3 percent last week as the dollar gained against the yen and euro, eroding the appeal of the metal as an alternative investment to U.S. assets. Gold futures for April delivery rose $6.20 to $547.50 an ounce on the New York Mercantile Exchange. The metal could rise further this week if investors keep seeking alternatives to stocks and bonds.
Thirteen of 32 traders, investors and analysts who were surveyed by Bloomberg advised buying gold. Eight suggested selling the metal, and 11 were neutral. Over the past year, spot gold prices have gained 22 percent. In comparison, the MSCI World index, which measures stocks in 23 major markets, has climbed 10 percent, and the MSCI World Sovereign index, which includes the debt of 21 major markets, has fallen 6.9 percent. Many funds "are still underinvested in gold," said Wolfgang Wrzesniok-Rossbach at the metals company Heraeus Metallhandel. "The political and financial reasons to keep a portion of their portfolios in gold haven't vanished." Crude oil rose in New York, led by natural gas prices, as the market braced for a bout of cold weather that is forecast across the northern United States this month. A warm front that was delivering temperatures substantially higher than normal on Monday and Tuesday will be followed by a spell of below-average temperatures that is expected to last for most of the rest of this month, private and government forecasters said. Crude oil for April delivery rose $1.81 to $61.77 a barrel on the New York Mercantile Exchange. Prices had dropped 5.8 percent last week.
Source: International Herald Tribune
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