Gold prices may rise

SEATTLE: Gold may rise for the first week in three on concern high oil prices will slow the US economy and boost the appeal of precious metals as an alternative investment to stocks, a Bloomberg survey showed. 

Nineteen of 43 traders, investors and analysts surveyed from Sydney to New York on Sept 2 and Sept 3 advised buying gold, which fell 0.7% to US$402.50 an ounce in New York last week. 

Fourteen recommended selling the metal and 10 were neutral. 

Gold rallied to a four-month high of US$416.80 an ounce Aug 20 as crude oil surged to a record of US$49.40 a barrel. Oil is 49% higher than a year ago, leading to higher fuel costs that helped slow retail spending and reduced automobile sales. 

Oil and gold “have a historical relationship,'' said Patrick Chidley, an analyst at Barnard Jacobs Mellet (US) LLC in New York. “When oil blows and gets going, gold follows it up. People had taken a breather on fear of inflation, but the fundamentals have not gone away.'' 

In the 20 weeks since Bloomberg began surveying investors and analysts, the poll indicated gold may rise in 18. The price rose in eight of those weeks. 

“Next week gold should come back up,'' Waheed Hassan, a gold analyst at Spelman Financial in New York, said. 

“People will start looking at the corporate numbers, and gold is a hedge against the equity market.'' 

Gold also may rise on speculation of lower-than-expected sales of the precious metal by European central banks, traders and analysts said. The European Central Bank and 14 other central banks may sell as little as 250 metric tons of gold annually over the next five years, half the amount allowed under a March agreement, UBS AG analyst John Reade said. 

The banks, including the 12 euro-region central banks, the Swiss National Bank and Sweden's Riksbank, agreed on March 15 to sell no more than 500 tons of bullion a year through 2009. The limit was 100 tons a year more than the cap agreed upon in 1999 for the five years through September. 

Less selling by the banks may help drive gold to US$470 before the end of the year, UBS's Reade said. – Bloomberg  

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