Gold futures rose to a record for the third straight session on speculation that government programs to stimulate the economy will erode the value of the dollar and boost demand for the precious metal as an alternative investment.
The dollar approached a five-week low against the euro before a report today that may show the U.S. housing market remains weak. The Federal Reserve may say at a meeting tomorrow that it’s considering more measures to keep borrowing costs low.
“The longer we continue with no real change in the U.S. economic situation, the more likely we’ll get another round of quantitative easing,” said Frank McGhee, the head dealer at Integrated Brokerage Services in Chicago. “The underlying loose monetary policies will erode the value of the currency against gold.”
Gold futures for December delivery rose $1.10, or 0.1 percent, to $1,278.60 an ounce at 8:42 a.m. on the Comex in New York. Earlier, the price reached a record $1,284.90.
Holdings in gold-backed exchange-traded products climbed to an all-time high on Sept. 17.
The Fed has kept the benchmark interest rate at zero percent to 0.25 percent since December 2008 and bought back Treasuries to revive the economy.
Before today, gold climbed 17 percent this year, outperforming global equities, Treasuries and most industrial metals. Futures headed for the 10th straight annual gain.
The Fed is likely to affirm at tomorrow’s meeting its pledge to keep interest rates low for an “extended period” and maintain the floor on its holdings of securities, according to economists surveyed by Bloomberg.
The Thomson Reuters/University of Michigan preliminary index of consumer sentiment dropped to a one-year low of 66.6, figures showed Sept. 17. Economists in a Bloomberg News survey estimate that a National Association of Home Builders/Wells Fargo confidence index due today will record a level of 14 for September, up from 13 last month. Readings below 50 mean more respondents said conditions were poor.
Gold gained this year amid tame U.S. inflation. The metal is traditionally bought as a hedge against rising consumer prices. Inflation expectations, based on the 10-year U.S. Treasury breakeven rate, have fallen to 1.79 percent from 2.21 percent six months ago.
The 14-day relative-strength index for gold futures has been above 70 since Sept. 16, a signal to some traders that the price is poised to fall.
“I’m a weak long at these levels,” McGhee said. “Gold is at the top of a very long run and susceptible to a correction.”
Silver futures for December delivery rose 4.4 cents, or 0.2 percent, to $20.86 an ounce. On Sept. 17, the metal climbed to the highest closing price since 1980.
Platinum futures for October delivery gained $2.50, or 0.2 percent, to $1,624.40 an ounce on the New York Mercantile Exchange.
Palladium futures for December delivery fell $7.55, or 1.4 percent, to $538.115 an ounce.
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