Gold Rises in London as Inflation May Spur Investment Demand
By Claudia Carpenter
Nov. 9 -- Gold rose in London on speculation rising raw-material costs may renew investor demand for the metal as a hedge against inflation.
The 24-member Goldman Sachs Commodity Index has increased 3.4 percent this month, and copper, crude oil, coffee and sugar extended gains today. The pound and euro rose against the dollar today on forecasts for higher interest rates in Europe to curb escalating prices.
``Inflationary pressures will be supportive for gold'' into next year, said Martin Squires, an analyst at JPMorgan Chase & Co. in London. ``Gold has put in its low for now.''
Gold for immediate delivery rose $2.30, or 0.4 percent, to $618.10 an ounce at 10:05 a.m. in London. The price dropped 1.4 percent yesterday, the biggest decline in two weeks.
U.K. home prices rose 1.7 percent last month, the most since April, mortgage lender HBOS Plc said today in a statement. The Bank of England is set to raise its benchmark interest rate a quarter point to 5 percent today, according to economists surveyed by Bloomberg News. The bank's decision is due at noon.
Investor demand for gold through funds listed in New York, London, Melbourne and Johannesburg climbed today to 16.68 million ounces from 16.5 million ounces yesterday, according to the Exchange Traded Gold Web site. The funds allow investors to buy gold through a stock without purchasing the metal or futures contracts. Every new share bought requires the fund to purchase gold in the open market and deposit the bullion in vaults of banks such as HSBC Holdings Plc, JPMorgan Chase and Bank of Nova Scotia.
``We certainly have seen for the last couple of days a lot of interest in the products,'' said Owen Rees, a marketing adviser to the Lyxor Gold Bullion Securities fund listed on the London Stock Exchange.
Gold in the Lyxor fund has climbed 14 percent since the beginning of October, compared with 5 percent growth in the biggest gold fund, StreetTracks Gold Trust traded on the New York Stock Exchange, figures from Exchange Traded Gold show. About 18 percent of the London stock is owned by French investors, Rees said.
Silver gained 1 cent to $12.55 an ounce in London. Platinum rose $8 to $1,165.50, and palladium was down $2.50 at $325.50.
