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1436.30 Gold, Near Record, May Gain on Libya Political Unrest, Inflation Concerns
By Nicholas Larkin - Mar 2, 2011 5:21 AM PT

Gold, trading near a record in New York, may climb as unrest in Libya and concern inflation will accelerate boost demand for the metal as an alternative investment. Silver climbed to the highest price since 1980.

Gold yesterday climbed to a record $1,435.60 an ounce. Oil rose above $100 a barrel in New York as Libyan rebels braced for renewed clashes with forces loyal to leader Muammar Qaddafi. European producer-price inflation accelerated more than forecast by economists in January. Gold purchases in China climbed to 200 metric tons in the first two months of 2011, UBS AG said.

“The tensions in the Middle East and North Africa are supportive and rising inflation is, of course, another bullish factor,” Dan Smith, an analyst at Standard Chartered Plc in London, said by phone today. Growing Chinese demand for bullion will support prices, he said.

Gold futures for April delivery rose $2.10, or 0.1 percent, to $1,433.30 an ounce at 7:59 a.m. on the Comex in New York. Prices earlier today rose as high as $1,435.30. The metal for immediate delivery in London was little changed at $1,432.95, after touching a record $1,434.93 yesterday.

Silver for May delivery in New York was up 0.8 percent at $34.70 an ounce after earlier today climbing to $34.80, the highest price since March 7, 1980. Futures reached a record $50.35 that year.

Spreading Unrest

Gold rose to $1,430.50 an ounce in the morning “fixing” in London, used by some mining companies to sell output, from $1,420.75 at yesterday’s afternoon fixing.

Concern about rising inflation and currency debasement drove gold prices up 30 percent last year for a 10th annual gain. Asian countries from China to Indonesia raised interest rates this year to curb rising consumer prices. Increasing food and commodity prices have contributed to unrest that started in Tunisia in January and spread to Egypt, Bahrain, Iran and Yemen.

Qaddafi is attempting to regain control of major cities after the U.S. and European nations began planning for a no-fly zone. Saudi Arabia’s benchmark stock index plunged the most in two years yesterday on concern disturbances may extend to the kingdom.

“Given the continuing strong fundamentals and the concerns of geopolitical instability spreading to Saudi Arabia and other autocratic oil producing nations, gold and silver look set to challenge $1,500 an ounce and $40 an ounce in the coming weeks,” analysts at Goldcore Ltd. in Dublin said in an e-mail.

Factory-gate prices in the euro region jumped 6.1 percent in January from a year earlier, a report showed today. That’s the fastest since September 2008 and above the 5.7 percent gain forecast in a Bloomberg survey of economists.
Chinese Demand

Peter Hickson, global commodities strategist at UBS, didn’t give a comparable figure for 2010 Chinese gold purchases yesterday. The estimate for the two-month period compares with full-year consumer demand from China of 579.5 tons for last year, according to the World Gold Council.

Federal Reserve Chairman Ben S. Bernanke said yesterday that the surge in oil and other commodity prices probably won’t cause a permanent increase in broader inflation. He repeated that U.S. borrowing costs are likely to stay low.

Palladium for June delivery gained 0.6 percent to $821.80 an ounce. It touched a 10-year high of $863.70 on Feb. 22. Platinum for April delivery was 0.1 percent lower at $1,842.90 an ounce.

http://www.bloomberg.com/news/2011-03-02/gold-trades-near-record-on-turmoil-in-the-middle-east-inflation-concerns.html