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Gold Climbs to Five-Month High on Demand for Money Alternative

By Claudia Carpenter

May 4 (Bloomberg) -- Gold futures climbed to a five-month high in New York on signs of increased demand for the metal as an alternative to the euro and other currencies.

Bullion rose to records in euros, Swiss francs and British pounds, extending gains this year as concern about sovereign debts in Europe spurred investors to seek a hedge. Government workers in Greece, which is being bailed out by the European Union and the International Monetary Fund, began the first day of a 48-hour strike against budget cuts.

“Gold is incorporating a premium due to currency and default risk,” said Bayram Dincer, an analyst at LGT Capital Management in Pfaeffikon, Switzerland. “There is a high risk aversion among gold investors, and it’s all about safe haven.”

Gold futures for June delivery rose as much as $7.40, or 0.6 percent, to $1,190.70 an ounce, the highest intraday price since Dec. 4, on the Comex in New York. The metal was at $1,187.30 at 8:23 a.m. local time. Immediate-delivery bullion advanced 0.5 percent to $1,187.60 in London.

Prices in dollars are still 3.3 percent below the record $1,227.50 an ounce on Dec. 3. That signals more confidence in the dollar than European currencies or the yen, Dincer said. Gold has gained 8.3 percent this year in dollars, 9.9 percent in yen, 14 percent in Swiss francs, 15 percent in sterling and 18 percent in euros.

Higher ‘Fixing’

Gold rose to $1,184.25 an ounce in the morning “fixing” in London, used by some mining companies to sell production, from $1,179.25 at the afternoon fixing on April 30. No fixing took place yesterday, when U.K. financial markets were closed for a national holiday.

Bullion will trade at $1,100 an ounce in six months and $1,050 in a year, below previous forecasts of $1,250 and $1,175, Robin Bhar, an analyst at Credit Agricole Corporate & Investment Bank in London, said in a report today.

Greek state workers escalated protests against 30 billion euros ($40 billion) of additional wage cuts and tax increases. The country’s prime minister has called on citizens to endure more sacrifices in return for an EU-IMF loan bailout before debts come due this month. Officials reached agreement over the weekend on a rescue plan.

“Early indications are that it should be reasonably constructive for risk assets and provide some temporary relief, at least, for the beleaguered high-yielding European bond markets and the euro,” Bhar said of the bailout accord.

IMF Reserves

Concern about sovereign debt issues is driving investor demand for gold, according to Eliane Tanner, an analyst at Credit Suisse Group AG in Zurich.

The IMF’s gold reserves declined by 18.5 metric tons (about 595,000 ounces) in March following the sale of 5.6 tons of metal in February, according to the World Gold Council.

Platinum for July delivery dropped 0.7 percent to $1,716.70 an ounce and palladium for June delivery fell 1.9 percent to $537.95 an ounce on the New York Mercantile Exchange. Both are used in catalysts to reduce harmful exhaust fumes from vehicles. New-car registrations in Germany dropped 32 percent in April from a year earlier, according to the German Automobile Industry Association.

July silver futures declined 0.6 percent to $18.72 an ounce.

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a2EDQTSZL3pw