Gold advanced for the third straight day on speculation that the US dollar will drop, boosting the appeal of the precious metal as an alternative asset.
The greenback fell against a basket of six major currencies. Yesterday, the gauge dropped 0.6 per cent as the Federal Reserve said its benchmark interest rate will remain at a record-low level for an ''extended period.'' Last year, gold rallied 24 per cent as the Fed held rates close to zero per cent, sending the dollar down 4.2 per cent.
''The Fed is very reluctant to tighten too early,'' said Kevin Davitt, a senior market analyst at LaSalle Futures Group in Chicago. ''Our loose monetary policy can weaken the dollar and strengthen the metals.''
Gold futures for April delivery rose $1.70, or 0.2 per cent, to $1124.20 an ounce on the Comex in New York. The price climbed 1.9 per cent in the previous two sessions.
The metal will trade at $1390 in 12 months, Goldman Sachs Group said in a report. That compared with an estimate of $1380 last month.
''The low US real-interest-rate environment, combined with continued gold exchange-traded-fund buying and reduced central-bank sales, will continue to provide strong support for gold prices in 2010 and 2011,'' the bank said.
Gold’s gains may be limited should investor demand ease, analysts said. Investment in the SPDR Gold Trust, the biggest exchange-traded fund backed by bullion, has been unchanged at 1115.51 metric tons since March 10.
Silver futures for May delivery rose 16.9 cents, or 1 per cent, to $US17.523 an ounce, gaining for a third day.
Platinum for April delivery gained $US4.90, or 0.3 per cent, to $US1635.60 an ounce on the New York Mercantile Exchange. June palladium futures climbed $US6.45, or 1.4 per cent, to $US478.85 an ounce.
