talk of dollar alternative circa late 70s

With Gold only $US 1.80 below this years high of $US 687.20 spot future close of February 27 more talk of Gold as the US Dollar alternative in the mainstream press will help propel gold to and past the $US 721.50 which is the post 2002 bull market spot future closing high for Gold set in May 2006.

Gold Rises on Demand for Dollar Alternative; Silver Climbs

By Pham-Duy Nguyen

April 13 (Bloomberg) -- Gold in New York rose to the highest in almost a year as a decline in the value of the dollar boosted the appeal of the precious metal as an alternative investment. Silver also climbed.

Gold generally moves in the opposite direction of the dollar, which fell to the lowest in more than two years against six major currencies. Before today, gold had gained 6.5 percent this year, while the dollar index has dropped 1.5 percent.

``The dollar weakness is catching up to gold,'' said Ron Goodis, futures trading director at Equidex Brokerage Group Inc. in Closter, New Jersey. ``Gold looks strong.''

Gold futures for June delivery rose $10.20, or 1.5 percent, to $689.90 an ounce on the Comex division of the New York Mercantile Exchange, the highest closing price for the most- active contract since May 17.

The dollar fell to the lowest against the euro in more than two years on speculation Europe's economy will outpace the U.S. Consumer confidence in the U.S. fell in April for the third month. The U.S. currency was also down against the British pound, the Japanese yen and the Canadian dollar.

``Gold's rally is mostly off the dollar weakness,'' said Billy Flahive, a trader at Eagle Futures Inc. in New York. ``If gold can get above $688, there'll be good follow through.''

Gold has had six annual gains, reaching a 26-year high on May 12 of $732 an ounce. Prices have increased 1.6 percent this week, the sixth straight weekly gain.

Dollar Bears

Five of the past six bear markets for the dollar led to an increase in gold prices. Investment in the StreetTracks Gold Trust, an exchange-traded fund backed by bullion, rose to $10.8 billion on April 11, the most since the fund began trading in November 2004. The Trust currently has 495 metric tons of gold in storage, or about 20 percent of annual mine production.

``Trends are in place and people want to own gold,'' said Goodis of Equidex. ``I'm long gold and other currencies and short the dollar.''