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Gold Climbs in London on Weaker Dollar, Indian Jewelry Buying

Gold was poised to snap two weeks of declines

Gold was poised to snap two weeks of declines as the dollar weakened against the euro and jewelers from India increased buying before the country's wedding season.

The euro strengthened, and is set for the biggest weekly gain against the dollar in three months, on speculation European Central Bank President Jean-Claude Trichet tomorrow will signal further interest-rate increases to curb inflation. A weaker dollar may make gold cheaper for foreign buyers, such as jewelers from India, the world's biggest consumer of the precious metal.

``We've seen some pretty phenomenal physical demand from India, which has limited gold's downside potential,'' said James Moore, a Kettering, U.K.-based analyst with The dollar's fall is also pushing gold higher as investors seek an alternative investment, he added.

Gold for immediate delivery rose $7.29, or 1.3 percent, to $591.48 an ounce as of 11:59 a.m. London time. The metal is up 2.1 percent this week, the first gain since the week ended Sept. 1.

Gold demand fell 16 percent in the second quarter, the third straight quarterly decline, as higher prices deterred jewelers. Purchases by jewelers accounted for 73 percent of demand last year, according to the producer-funded World Gold Council.

Indian jewelers have started buying again to stock up for sales during the country's wedding and festival season, and before year-end holidays around the world, Moore said. The wedding season starts at the end of month.

Higher oil prices also boosted gold, Moore said. Crude oil rose for a second day in New York, rebounding from a slump that had left prices close to the level where some Organization of Petroleum Exporting Countries said they would consider cutting back production.

Oil Push

Crude oil rose 0.7 percent to $62.02 a barrel on the New York Mercantile Exchange. It surged to a record $78.40 on July 14.

``The rebound in oil prices has pushed up gold prices,'' said Darren Heathcote, head of trading at Investec Australia, from Sydney. ``The weaker dollar is adding to it. Especially when times are quiet, with no geopolitical tensions, gold tends to trade off the dollar,'' he said.

The precious metal surged to a 26-year high of $730.40 on May 12, partly as record oil prices spurred investors to buy bullion as an anti-inflation hedge. Gold has since slumped to as low as $542.45 on June 14, as crude fell.

Gold prices ``will bounce again,'' after an annual deadline for European Central Bank sales expires at the end of September, Peter Hambro, founder and chairman of Peter Hambro Mining Plc, said yesterday. The company is Russia's third-biggest gold miner.

Central Banks

Under the Central Bank Gold Agreement, banks in Europe agreed to sell no more than 500 tons in the year ending September. They've sold 380 tons as of Sept. 19, the London-based World Gold Council said.

Gold ``is still a bit at risk of further pressure,'' Moore said. ``There is potentially more metal coming onto the market.''

Among other precious metals for immediate delivery in London, silver rose 11 cents, or 1 percent, to $11.29, palladium climbed $9, or 2.9 percent, to $318 while platinum gained $10.50, or 0.9 percent, to $1,149.