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Gold Climbs to Record for Second Day on Inflation; Silver at 31-Year Peak

April 6, 2011

bloomberg

Gold gained to a record for a second day in New York and London as rising inflation spurred demand for an investment haven and the dollar slumped against the euro. Silver advanced to a 31-year high.

China raised interest rates yesterday for the fourth time since mid-October ahead of a report that may show consumer prices climbed last month at the fastest pace since 2008. The euro rallied to a more-than 14-month high versus the greenback before the European Central Bank meets tomorrow to decide on interest rates.

“The reality of accelerating inflation in China is indeed positive for gold,” UBS AG analyst Edel Tully said in a report. Some investors buy gold as a hedge against rising prices.

Gold for June delivery rose $6.90, or 0.5 percent, to $1,459.40 an ounce at 8 a.m. in New York after reaching a record $1,462.10 earlier today. Gold for immediate-delivery rose as much as 0.4 percent to an all-time high of $1,460.92 an ounce, and was up 0.2 percent at $1,458.78 in London.

Gold gained to $1,457 an ounce in the morning “fixing” in London, used by some mining companies to sell output, from $1,433.50 at yesterday’s afternoon fixing.

The dollar declined as much as 0.6 percent against the euro before tomorrow’s meeting of the ECB, which will increase its main interest rate by 25 basis points to 1.25 percent, according to a Bloomberg survey of economists.

The dollar’s level “is definitely one of the forces behind” gains in gold, Eugen Weinberg, an analyst at Commerzbank AG in Frankfurt, said today by e-mail. Gold typically moves inversely to the U.S. currency.

Libya Conflict

Demand for precious metals strengthened over the past week as investors sought a shelter to protect their wealth against the conflict in Libya, the nuclear crisis in Japan and European sovereign debt concerns. Moody’s downgraded Portugal’s long-term government bond ratings by one level to Baa1 from A3, and said it’s considering another reduction.

Consumer prices in China climbed 5.2 percent last month from a year before, the fastest pace since 2008, according to a Bloomberg News survey of nine economists. The statistics bureau will release the number on April 15, according to a preliminary schedule. Consumer prices jumped 4.9 percent in February from a year earlier, topping the government’s full-year target of 4 percent.

Gold may extend gains toward $1,465.71 an ounce after breaking through the “psychological” level of $1,450, UBS’s Tully wrote.

Federal Reserve Chairman Ben S. Bernanke this week said inflation must be watched “extremely closely,” spurring bets that interest rates may be raised sooner than analysts expected.

Gold-Silver Ratio

Silver for May delivery in New York rose 1.2 percent to $39.645 an ounce, and earlier today touched $39.71, the highest price since January 1980.

An ounce of gold bought as little as 36.86 ounces of silver in London today, the lowest level since September 1983, data compiled by Bloomberg show. Gold has jumped 29 percent in the past year, and silver more than doubled.

Gold held in exchange-traded products rose 1.51 metric tons to 2,030.27 tons yesterday, data compiled by Bloomberg from 10 providers show. Holdings reached a record 2,114.6 tons in December. Silver ETP assets were unchanged at 15,395.52 tons, data from four providers show.

Palladium for June delivery was little changed at $792.75 an ounce, while platinum for July delivery rose 0.6 percent to $1,808.30 an ounce.

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