-->Gold May Rise On Growing Demand From China, India, Survey Shows.

Gold May Rise on Growing Demand From China, India, Survey Shows
Aug. 1 (Bloomberg) -- Gold may rise for a third straight week on speculation that higher demand for the precious metal in China and India will exceed supply created from sales by European central banks, a Bloomberg survey showed.

Thirty-five of 46 traders, investors and analysts surveyed July 28 and July 29 from Melbourne to New York advised buying gold, which rose 1.1 percent last week to $435.80 an ounce on the Comex division of the New York Mercantile Exchange. Six recommended selling the metal, and five were neutral.

``What we're seeing in demand is very positive,'' Newmont Mining Corp. Chief Executive Officer Wayne Murdy said in a telephone interview July 27 from Denver. ``Once you get into the second half of the year -- into August and September -- the jewelry trade starts to build inventory for marriages in India and the Chinese new year.''

Gold soared 4.8 percent in August last year as manufacturers geared up for increased jewelry demand during year-end holidays and the wedding season in India, the world's biggest buyer of gold. European central banks, which agreed to limit gold sales to 500 tons a year through September, had sold 415.4 tons through June 23, according to the World Gold Council.

Gold for December delivery rose $4.90 an ounce last week, meeting expectations of the majority of analysts surveyed July 21 and July 22. Bloomberg's survey has forecast the direction of prices accurately in 36 of 66 weeks, or 55 percent of the time.

``Gold prices will rise ahead of the festive demand in India,'' said Prithviraj Kothari, director of Mumbai-based Riddhi Siddhi Bullion Ltd.

Seasonal Lull

Gold prices fell 0.3 percent last month during a seasonal lull in demand. ``June and July are usually cyclically the lowest month for the gold price,'' Newmont President Pierre Lassonde said on a July 27 conference call with investors and analysts.

``The gold price does not want to go below $420 even though a lot of mornings you look at the screen and it seems traders out there are trying to kick it down,'' Lassonde said. ``It doesn't want to go down.''

Fifteen central banks in Europe, including the European Central Bank, agreed last year to limit their gold sales to 500 tons annually for five years. The sales periods end each year in September.

The European Central Bank said last week three member banks sold gold worth 175 million euros ($212 million) in the week ending July 22. With gold averaging about 350 euros an ounce that week, that's equivalent to about 15.5 metric tons.

Central Bank Sales

Including other sales in the past month, the total is probably closer to 484 tons, according to Paul Yusem, an individual investor in Lombard, Illinois, who has traded gold futures for five years.

``There is only one way to temper this robust physical demand -- much higher gold prices,'' Yusem said.

From the seasonal low in July to its high in August, gold has rallied on average $26 during that period during the previous four years.

``Nothing points to this year being any different,'' said Gregory M. Orrell, president of Orrell Capital Management Inc. in Livermore, California.

Last year, gold rose $29 from the July low to the high in August. In 2003, the rally was $38.40. The low last month was $418.20 on July 15.

The rise in gold last week above the 200-day moving average for the first time since July 1 may trigger more buying by traders who follow charts and graphs, pushing prices to as high as $450 this month, said William O'Neill, a partner at Logic Advisors LLC, a commodity consulting company in Upper Saddle River, New Jersey.

Speculators Holdings

In the week ended July 26, speculators had the lowest net holdings of Comex gold futures since June 7, the U.S. Commodity Futures Trading Commission said July 29. Hedge funds and other large speculators bought 49,022 more contracts than they sold, down 9.4 percent from the week before, the commission said.

``Hedge funds continue to have a bullish bias, and with each passing week, gold's role as an alternative asset increases,'' said O'Neill, former head of futures research at Merrill Lynch & Co. in New York.

Gold has climbed 12 percent in the past year as a decline in the dollar boosted the appeal of the precious metal as an alternative to U.S. stocks and bonds. Gold reached a 16-year high of $458.70 an ounce in December as the dollar fell to a record against the euro.

A futures contract is an obligation to sell or buy a commodity at a set price by a specific date.



To contact the reporter on this story:
Claudia Carpenter in New York at ccarpenter2@bloomberg.net.
Last Updated: July 31, 2005 16:34 EDT