Sept. 24 (Bloomberg) -- Gold rose after the dollar fell to an all-time low against the euro, boosting the precious metal's appeal as an alternative investment. Silver also gained.
Gold rose 2.9 percent last week and traded at a 27-year high as the dollar fell 1.5 percent against the euro. Five of the past six bear markets in the dollar boosted gold.
``The declining dollar makes you wonder about demand for U.S. assets and makes you want to buy gold and other commodities,'' said Frank Lesh, a trader at FuturePath Trading LLC in Chicago.
Gold futures for December delivery rose 40 cents, or 0.1 percent, to $739.30 an ounce on the Comex division of the New York Mercantile Exchange. The metal reached $747.10 on Sept. 21, the highest for a most-active contract since Jan. 22, 1980, the day after the price reached a record $873.
Silver futures for December delivery rose 2 cents, or 0.1 percent, to $13.64 an ounce. The metal has climbed 5.5 percent this year.
The euro reached a record $1.4130 today, the highest since the 13-nation currency began trading in 1999. Gold has gained 16 percent this year.
``We expect gold to stabilize at this level,'' said Thomas Winmill, president of Midas Management Corp. in New York. ``The dollar's direction is very important to the price of gold.''
Price Charts
Historical price charts show gold may be poised for a decline after gaining for five straight weeks. Gold's 14-day relative strength index has been above 70 since Sept. 6, a signal that the price may drop. Gold fell as low as $733.50 today before rebounding.
Speculative long positions in gold futures, or bets prices will rise, outnumbered short positions by 141,650 contracts on the Comex in the week ended Sept. 18, U.S. Commodity Futures Trading Commission data showed on Sept. 21. That's the highest since late February.
``This makes us increasingly wary about gold's near-term upside potential,'' John Reade, an analyst at UBS AG said in a report. ``Any signs of a bounce in the dollar will likely provoke heavy profit-taking in gold.''
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