Gold May Rise as Slowing U.S. Economy, Weaker Dollar Fuel Investor Demand

Gold may gain for a third day in New York as concern about Europe’s debt crisis, signs that the U.S. economy is slowing and a weakening dollar spurs demand for the metal as an alternative investment. Palladium climbed.

U.S. payrolls grew at the slowest pace in eight months in May and manufacturing expanded at its slowest pace in more than a year, reports showed last week. The European Union needs to reach an accord on Greece’s debts before finance ministers meet on June 20, EU Economic and Monetary Affairs Commissioner Olli Rehn said yesterday. The dollar slid to a one-month low against six currencies. Gold typically moves counter to the greenback.

“Speculation U.S. economic growth is losing pace and the Greek debt crisis is worsening” is supporting gold, John Meyer, an analyst at Fairfax IS in London, wrote in a report today. “The dollar is off this morning, helping support prices as they push toward the record.”

Gold for August delivery fell 40 cents to $1,546.80 an ounce by 7:59 a.m. on the Comex in New York. It yesterday reached $1,555, the highest price since May 2. Immediate- delivery gold was 0.1 percent higher at $1,546.05 in London.

Concern about faster inflation, Europe’s debt crisis, a weakening dollar and fighting in Libya boosted gold to a record $1,577.40 on May 2. Prices are up 8.8 percent in 2011 after climbing the past 10 years, the longest run of gains in at least nine decades in London. Federal Reserve Chairman Ben S. Bernanke is scheduled to speak today at the International Monetary Conference in Atlanta as the bank’s second round of bond buying, called quantitative easing or QE2, ends this month.

Debt Crisis

European Central Bank President Jean-Claude Trichet signaled for the first time he may support encouraging investors to buy new Greek bonds to replace maturing securities as officials seek to stem the nation’s debt crisis. ECB policy makers have opposed any measure that could be classed as a default to avoid what Rehn described yesterday as a “Lehman Brothers catastrophe.”

“The market’s still very sensitive to what’s happening in Greece and Europe, and at the same time sensitive to U.S. data,” Darren Heathcote, head of trading at Investec Bank (Australia) Ltd., said by phone. “There doesn’t seem to be many reasons to be selling gold at this present moment.”

Gold Fund

China Universal Asset Management Co. received approval from the nation’s financial-market regulator to start a fund that will invest holdings in overseas exchange-traded products backed by precious metals. Liu Ming, a spokesperson for China Universal, didn’t give details of when the fund would start raising money, nor how the extent of the holdings in each metal will be set.

“All the market participants we met with in China last week expect a slowdown in physical demand before buying picks up again in September,” Edel Tully, a London-based analyst at UBS AG said today in a report. While there may be “summer headwinds” for gold, “this would be viewed by most as a short- term correction within a bullish market. It’s very difficult to leaveAsia, and in particular China, without feeling bullish about gold.”

Silver for July delivery rose 1.4 percent to $37.285 an ounce in New York. Palladium for September delivery climbed as much as 1.6 percent to a three-month high of $811.80 an ounce and was last at $806. Platinum for July delivery was 0.1 percent higher at $1,823.40 an ounce. www.bloomberg.com

Asian Stocks Drop on Global Economic Concern Over U.S., Greece

Asian stocks dropped on concern Greece’s debt crisis may worsen and after President Barack Obama said failure to raise the U.S. debt ceiling by early August might disrupt the global financial system.

BHP Billiton Ltd. (BHP), the world’s largest mining company, fell 1.9 percent in Sydney after gold and metal prices dropped. Rio Tinto Group, the second-biggest by sales, sank 1.5 percent.Toyota Motor Corp. (7203), the world’s No. 1 carmaker, slid 1.5 percent in Tokyo, whileMitsubishi UFJ Financial Group Inc. (8306), Japan’s biggest publicly traded bank, lost 0.3 percent.

“Investors are getting more sensitive about taking risks on concern about the future of Greek debt issues,” said Toshiyuki Kanayama, a market analyst at Tokyo-based Monex Inc. “They may continue putting money in safe bonds or cash, rather than stocks.”

The MSCI Asia Pacific Index declined 0.7 percent to 135.17 as of 9:35 a.m. in Tokyo. About five stocks fell for each that rose on the gauge, which recorded its second straight weekly decline last week amid concern China’s anti-inflation policies may crimp global growth.

Japan’s Nikkei 225 (NKY) Stock Average sank 0.6 percent, while South Korea’s Kospi Index lost 0.4 percent. Australia’s S&P/ASX 200 Index slid 1.4 percent. www.bloomberg.com

Coffee Rises to 14-Year High on Rainfall in Colombia; Cocoa Prices Slide

Coffee climbed to the highest price in New York in almost 14 years as rains may hurt crops inColombia, the world’s second-largest producer of arabica beans. Sugar advanced.

Colombia’s Agriculture Ministry said a lack of sunshine will hurt the nation’s coffee crops over the next few months. Coffee plantations are being damaged by landslides and rains, Hamburg-based broker Eugen Atte GmbH said on April 28. “What is scarier is that, according to weather experts, the worse rains are yet to come,” the broker said in a report.

Strong demand, record-low inventories and production disruptions in several major producer nations are supporting the market, Bjarne Schieldrop, chief commodity analyst at SEB AB,Sweden’s third-biggest bank by market value, wrote in a report today. “The situation originated with three consecutive disappointing Colombian crop years.”

Arabica coffee for July delivery rose 3.55 cents a pound, or 1.2 percent, to $3.0865 a pound by 8:31 a.m. on ICE Futures U.S. in New York. Earlier the price touched $3.089, the highest since May 1997. Robusta coffee for July delivery rose $58, or 2.3 percent, to $2,613 a metric ton in London.

Roadways across Colombia have been damaged by rainfall, according to a statement from the Agriculture Ministry. Floods, landslides and damaged bridges have isolated entire towns, according to Atte. The extent of the coffee losses is still unknown, German researcher F.O. Licht said in a report.

Production in the Andean nation will be 9.2 million bags in the current crop, the International Coffee Organization said on April 6. The figure is still below the 2007-08 level of 12.5 million bags, ICO figures show.

Guatemala Exports

Coffee exports from Guatemala, the largest producer in Central America, rose 8.7 percent to 447,265 bags in April, according to the country’s National Coffee Association, known as Anacafe. Exports for the marketing season started Oct. 1 came to 1.881 million bags, down 0.7 percent from 1.895 million bags in the previous season, data from the association showed.

Raw sugar for July delivery rose 0.40 cent, or 1.8 percent, to 22.27 cents a pound on ICE. White, or refined, sugar for August delivery fell $7.30, or 1.2 percent, to $607.80 a ton on NYSE Liffe, after reaching $597.50, the lowest since Oct. 4.

Egypt’s state-run Sugar and Integrated Industries Co. is seeking to buy 50,000 tons of raw sugar at a tender yesterday for May and June arrival, Hussein Ahmed, purchasing manager at the company, said by phone in Cairo.

Cocoa for July delivery dropped $65, or 2 percent, to $3,226 a ton in New York. Cocoa for July delivery fell 13 pounds, or 0.7 percent, to 1,968 pounds ($3,243) a ton in London. www.bloomber.com