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Gold climbs to highest since July on dollar's drop against euro

Gold in New York rose to the highest since July as a decline in the value of the dollar boosted the appeal of the precious metal as an alternative investment.

Demand for gold in exchange-traded funds, or ETFs, tracked by the World Gold Council has increased 2.1% this year to 18.5 million ounces. The gains accelerated this week as the dollar fell against the euro to the lowest since January 4. Investment in the StreetTracks Gold Trust reached $10 billion yesterday, the highest since the fund began trading in November 2004. “I'm warming to gold,” said Ronald Goodis, director of Equidex Brokerage Group Inc. in Closter, New Jersey. “A weaker dollar will propel gold higher.”

Gold futures for April delivery rose $7.50, or 1.1%, to $676 an ounce at 10:36 a.m. on the Comex division of the New York Mercantile Exchange. Prices earlier reached $676.60, the highest since July 17. Gold, sold in dollars, rose 23% last year, while the dollar fell 10% against the euro. A futures contract is an obligation to buy or sell a commodity at a set price for delivery by a specific date. The dollar fell against the euro as US retail sales stalled last month, suggesting slowing economic growth and indicating the likelihood the Federal Reserve will keep interest rates unchanged.

“The data encouraged traders to unwind dollar positions and the euro, yen, and gold were the most visible beneficiaries,” said Jon Nadler, an investment-products analyst at Montreal-based Kitco Minerals & Metals Co. The Fed has kept rates at 5.25% since June. The European Central Bank last raised rates to 3.5% in December, the sixth increase in a year. ECB Governing Council member Klaus Liebscher said inflation is still a concern, suggesting that rates may have to rise for the 13-nation currency. “It's possible with the dollar breaking down, gold might catapult past $675 and $700 soon,” Goodis of Equidex said. Silver for March delivery rose 19 cents or 1.4%, to $14.105 an ounce on Comex. Before today, silver had climbed 7.6% this year, while gold gained 4.8%. (Bloomberg)