Gold rose for a seventh straight session in New York, the longest rally in three years, on speculation that US policies will devalue the dollar, boosting the appeal of the precious metal as an alternative asset.
The dollar tumbled to a 15-month low against a basket of six major currencies yesterday, and gold climbed to a record $US1111.70 an ounce. The Federal Reserve has kept its benchmark interest rate to close to zero per cent since December to pull the economy out of recession.
"This is a dollar-devaluation story," said Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago. "The US will be the last to come out of this recession, and the Fed is going to have to keep rates low. Liquidity is still in the system. That is what the gold market is telling us."
Gold futures for December delivery rose $US1.10, or 0.1 per cent, to $US1102.50 an ounce on the Comex division of the New York Mercantile Exchange. The metal’s 6 percent rally this month was the longest since a seven-session, 4.7 per cent surge that ended on September 28, 2006.
"We expect the market to trade around $US1100 for a few days before a run at $US1150" at the end of the month, Barclays Capital said today in a report.
US President Barack Obama has increased the nation’s marketable debt to about $US6.95 trillion as the government borrows to fund spending programs. The Group of 20 industrial nations agreed on November 7 to continue stimulus programs aimed at spurring economic expansion.
