Gold strengthens overnight as greenback weakens

Gold has continued its tenth straight year of rallying. Photo / Greg Bowker

Gold futures nudged higher to a new record as support for the US dollar continued to erode, boosting demand for commodities as an alternative investment.

Gold futures for December delivery rose to as much as US$1,314.80 an ounce in New York and was recently at US$1309.25. Gold is rallying for a 10th straight year, which Bloomberg reported was the longest run since at least 1920.

Gold has advanced as the greenback slides to an eight-month low against a basket of currencies amid bets the Federal Reserve will extend its quantitative easing measures to revive a US economy that may only narrowly escape sliding back into recession.

Federal Reserve chairman Ben Bernanke is scheduled to testify before the Senate Banking Committee on Thursday in the US, giving investors an opportunity to gauge the prospects of the Fed extending its support for the world's biggest economy as the greenback heads for a quarterly loss.

The Dollar Index, which measures the US dollar against six major currencies, fell to 78.709 from 79.014 and briefly sank to 78.616.

The dollar fell to $1.364 per euro from $1.3585 yesterday and reached a five-month low of $1.3639 earlier.

The yen strengthened to 83.61 per dollar from 83.87, heading to the low it reached this month of 83.50 yen to the dollar after Japan intervened to weaken its currency. The Ministry of Finance is scheduled to detail how much it spent on currency intervention in the past month amid speculation it stands ready to act again.

The euro bought 114.06 yen from 113.94.

Copper rose to a 26-year high in London after figures showed Chinese manufacturing rose for a second month, stoking demand for the industrial metal from the world's biggest consumer.

The metal also gained after figures for the London Metal Exchange showed stockpiles are shrinking.

Copper for delivery in three months rose 1.4 per cent to US$8,064 a metric ton in London and earlier reached US$8,075 a ton.

Crude oil rose to a seven-week high after US fuel stockpiles fell.

Crude for November delivery climbed 2.4 per cent to US$77.99 a barrel on the New York Mercantile Exchange.

Equity markets were mixed overnight. The Dow Jones Industrial Average was little changed at 10858.70 and the Standard & Poor's 500 Index sat at 1147.63, down 0.01 per cent.

Hewlett-Packard rose 2.4 per cent after beating estimates with its forecast for sales and earnings. Chevron climbed 0.9 per cent as crude oil rallied.

Stocks in Europe fell after retailer Hennes & Mauritz AB said its gross margin has shrunk, pacing a decline in retailers and concerns re-emerged about debt levels in Spain.

The FTSE 100 fell 0.2 per cent in London, while Germany's DAX 30 dipped 0.5 per cent and France's CAC 40 fell 0.7 per cent.