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Gold, Silver Gain on Speculation Central Banks Will Cut Rates

By Pham-Duy Nguyen

Feb. 7 (Bloomberg) -- Gold futures rose on speculation central banks around the world will follow the U.S. in cutting borrowing costs, boosting the appeal of the precious metal as an alternative to currencies. Silver also gained.

The Bank of England today cut its benchmark lending rate for the second time in two months, and the European Central Bank signaled it may lower rates later this year. Gold rose 31 percent last year as the Federal Reserve cut borrowing costs to avoid a recession.

``You're going to see central banks start to cut rates,'' said Nick Ruggiero, a trader at Eagle Futures Inc. in New York. ``Gold will stay very strong.''

Gold futures for April delivery rose $3.10, or 0.3 percent, to $908.10 an ounce at 10:46 a.m. on the Comex division of the New York Mercantile Exchange. The price earlier touched $915.20.

Silver futures for March delivery gained 28.5 cents, or 1.7 percent, to $16.835 an ounce. Before today, the metal climbed 11 percent this year, while gold climbed 8 percent.

To contact the reporter on this story: Pham-Duy Nguyen in Seattle at [e-mail] .

Last Updated: February 7, 2008 10:48 EST

http://www.bloomberg.com/apps/news?pid=20601012&sid=a7Hyw8jzDVkg&refer=commodities