Gold Rallies on Weak Dollar

Gold rose to the highest in a month as surging oil prices and a weakening dollar boosted demand for the metal as a hedge against inflation. Silver also gained., Bloomberg 5/21/2008 9:59:39 AM

Crude-oil futures rose to a record $132.08 a barrel today and the euro climbed to the highest in more than three weeks against the dollar. Gold rose 31 percent last year as oil rallied 57 percent and the euro gained 11 percent against the dollar. The metal reached a record $1,033.90 on March 17.

Gold futures for June delivery rose $7.70, or 0.8 percent, to $927.90 an ounce at 12:08 p.m. on the Comex division of the New York Mercantile Exchange, after earlier reaching $930, the highest for a most-active contract since April 21.

Silver futures for July delivery rose 18.5 cents, or 1 percent, to $17.91 an ounce on the Comex. Before today, the price advanced 19 percent this year, while gold climbed 9.8 percent.

Silver has gained 7.7 percent since May 14. The metal, which is often used as a proxy for gold, may be little changed for the next three weeks, analysts at Societe Generale said in a report on May 19. A climb above $18.74 may trigger investors to sell, the report said.

Precious metals rallied after a report showed U.S. stockpiles of crude oil unexpectedly dropped, sending the price to more than $132 in New York for this first time. Crude has risen 99 percent in the past year. Heating oil also reached a record today.

Gold also gained after the dollar weakened against the euro for a second straight day. The euro rose as much as 0.8 percent to $1.5777. It reached a record $1.6019 on April 22.