Gold advances on more speculation

The metal reached an all-time high of US$1,174 an ounce Monday as the U.S. Dollar Index dropped the most in two weeks and Russia's central bank said it bought more bullion last month. The International Monetary Fund said it was trying to complete a planned sale of gold as soon as possible. The world's biggest gold-backed exchange-traded fund Monday rose to the highest level in almost five months.

Gold “is likely to find further investment demand in the coming session following the 3.9-ton increase in the SPDR ETF Monday,” James Moore, an analyst at TheBullionDesk.com in London, said in a report. “Gold has found good support around the US$1,160 level.”

Gold for immediate delivery added US$4.72, or 0.4 percent, to US$1,170.82 an ounce by 10:44 a.m. in London. Gold futures for December delivery on the New York Mercantile Exchange's Comex division gained 0.5 percent to US$1,170.90 an ounce, the eighth consecutive advance, after reaching a record US$1,174 Monday.

Among other precious metals for immediate delivery in London, silver added 0.2 percent to US$18.59 an ounce. Platinum slipped 0.3 percent to US$1,454.25 an ounce, while palladium lost 0.2 percent to US$371.25 an ounce.

Silver held in ETF Securities Ltd.'s exchange-traded commodities products rose 0.3 percent to a record 22.705 million ounces Monday, according to the company's Web site. Platinum holdings added 0.2 percent to a record 426,475 ounces, while palladium assets increased 2.3 percent to a record 616,423 ounces.

The dollar index, a six-currency gauge of the greenback's value, strengthened before Tuesday's release of revised gross domestic product data forecast to show the U.S. economy expanded slower than initially expected in the third quarter. The currency measure is down 7.4 percent this year.

The IMF, which set out two months ago to sell one-eighth of its gold reserves, is trying to complete the process as soon as possible, Andrew Tweedie, the head of the IMF's finance department, said. Earlier this month, India said it bought 200 metric tons from the IMF, followed by Mauritius's 2-ton purchase. Russia and Sri Lanka have also been buying gold.

“The investment case for gold has become increasingly compelling” with prices buoyed partly by central bank buying and a weaker dollar, Standard Chartered Plc analyst Dan Smith said Monday in a report. The metal will average US$1,150 an ounce in 2010 and US$1,300 in the fourth quarter next year, he said.

“There is definitely accumulation going on, whether by central banks or high net-worth individuals, so we can see the gold price is going to carry on moving higher, but that doesn't mean that we're not going to see consolidation or pullbacks,” David Baker, managing partner of Baker Steel Capital Managers, said in a Bloomberg Television interview.

The rally has pushed spot gold's 14-day relative strength index, a gauge of whether a commodity or security is overbought or oversold, above the level of 70 viewed by some investors and analysts who follow technical charts as signaling a decline. Tuesday's reading for spot prices was 80.17.

Holdings in the SPDR Gold Trust, the biggest exchange-traded fund backed by bullion, expanded Monday to 1,121.46 tons, the most since June 29. The fund's holdings reached a record 1,134 tons on June 1.

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