| Gold rallies after ecb begins stocking gold reserves Original Source Link: (May no longer be active) http://www.bloomberg.com/apps/news?pid=20601082&sid=adeTC33fu3CI&refer=canadahttp://www.bloomberg.com/apps/news?pid=20601082&sid=adeTC33fu3CI&refer=canada
Gold Extends Rally on Speculation Investment Demand Will Gain By Pham-Duy Nguyen
Jan. 3 (Bloomberg) -- Gold climbed to a four-week high in New York on speculation that demand will improve as investors seek an alternative to U.S. securities.
Gold rallied 23 percent in 2006, gaining for a sixth straight year. The metal outperformed stocks and bonds as the dollar fell 7 percent against a basket of six major currencies. Investment in the StreetTracks Gold Trust, an exchange-traded fund linked to the price of bullion, reached a record $9.3 billion in December.
``There's still room on the upside for gold to rally,'' said Nick Ruggiero, a trader at Eagle Futures Inc. in New York. ``People are starting to look at gold again, and buying will start to pick up within the next week.''
Gold futures for February delivery rose $5, or 0.8 percent to $643 an ounce at 10:19 a.m. on the Comex division of the New York Mercantile Exchange, after earlier reaching $647.30, the highest since Dec. 6.
The benchmark 10-year U.S. Treasury returned 1.2 percent for investors in 2006 while the Standard & Poor 500 Index gained 12 percent.
``The dollar's failure to thrive in what should be a healthy cyclical environment for the U.S. currency suggests heightened concern about structural vulnerabilities heading into the new year,'' Robin Bhar, an analyst at UBS AG in London, said in a note to clients. ``Gold and silver are the most reliable way to play U.S. dollar weakness.''
Central Bank Purchase
Gold may also gain as some central banks buy gold to diversify foreign currency reserves, some analysts said.
The European Central Bank on Dec. 28 said one member bank had purchased gold in the week ending Dec. 22 while one member bank had sold. The ECB didn't name the banks or state how much was purchased. A net 41 million euros ($54 million) worth of gold was sold. The purchase was the first since October.
``This has the gold market abuzz,'' said Dennis Gartman, a trader, economist and editor of the Suffolk, Virginia-based Gartman Letter. He recommended yesterday that clients purchase gold.
Sales of gold by central banks fell 31 percent in the third quarter to 59 metric tons from a year ago, according to the World Gold Council. European Central Bank members this year failed to meet the 500-ton quota for gold sales under the second so-called Central Bank Gold Agreement.
A futures contract is an obligation to buy or sell a commodity at a set price for delivery by a specific date.
Last Updated: January 3, 2007 10:20 EST
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