Aug 6

Written by:
8/6/2010 9:52 AM 

By Pham-Duy Nguyen | Bloomberg

Gold futures rose on Friday, extending the longest rally since November, as the dollar dropped against the euro, boosting the appeal of the precious yellow metal as an alternative asset.

The greenback fell as much as 1.1 percent after a payroll report signaled the U.S. will be slow in recouping jobs lost in the recession.

Gold has reached a three-week high. Before Friday, the metal increased 9.4 percent this year, climbing to a record $1,266.50 an ounce on June 21.

"The dollar is getting odious compared to the euro, which was the rankest thing around in the first half of this year," said Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago. "If the Fed has to do something more accommodative to spur the economy, you're going to see an explosive rally in gold."

Gold futures for December delivery rose $9.80, or 0.8 percent, to $1,209.10 at 12:07 p.m. on the Comex in New York. The metal headed for the eighth straight gain, the longest rally since November. Earlier, the price reached $1,213.30, the highest level for a most-active contract since July 15.

Gold priced in euros also reached a record in June amid Europe’s sovereign-debt crisis. The metal has historically moved in tandem with the euro as an alternative to the dollar.

"The positive correlation of gold prices to the euro is re-establishing itself," Deutsche Bank AG said in a report. "Given our bearish outlook for the dollar, we believe this will trigger further gains in the gold price." The bank forecast gold will average $1,275 in the third quarter.