Sept. 29 (Bloomberg) -- Gold prices climbed in New York, resuming a one-month rally to a 17-year high, as surging energy costs prompted investors to buy the precious metal as a hedge against inflation.

Heating bills for U.S. consumers are set to jump this winter after natural-gas prices more than doubled to a record and wholesale prices of heating soared 55 percent. The U.S. is the world's top consumer of oil, accounting for about a quarter of global use.

``You're going to see gold gain on the back of the oil complex, and that just goes back to the inflationary trade,'' said Michael Guido, director of hedge-fund marketing and commodity strategy in New York for Paris-based Societe Generale SA.

Gold futures for December delivery rose $2.70, or 0.6 percent, to $475.80 an ounce on the Comex division of the New York Mercantile Exchange, the highest close since January 1988. Prices earlier fell as low as $471.40. The metal reached $479 on Sept. 22, the highest intraday price in 17 years.

A futures contract is an obligation to buy or sell a commodity at a set price by a specific date.

U.S. consumer prices rose in the second quarter at a 2.6 percent annual pace, faster than previously estimated, the Commerce Department said today. U.S. Federal Reserve policy makers including Thomas Hoenig and Janet Yellen this week said the central bank will be vigilant on containing prices.

Gold may rise to $525 an ounce by early next year as jewelry demand climbs and production from mines declines, Newmont Mining Corp. President Pierre Lassonde said yesterday in an interview at the company's Denver headquarters.

`On Fire'

``We're seeing the best supply-demand fundamentals in this industry in about 20 years,'' Lassonde said. ``The jewelry market is on fire'' and ``supply is falling, mostly because mine production is coming off again,'' he said.

Gold's gains may be limited as some investors sell to make a profit following the recent rally.

``The market is overbought,'' ' said Leonard Kaplan, president of Evanston, Illinois-based Prospector Asset Management. ``The funds are massively long, and they want to get out. Once the funds start exiting, who are they going to sell to?''

Hedge funds and other large speculators had net-long positions, or bets prices will rise, totaling 158,126 gold-futures contracts on Sept. 20, U.S. figures showed. Since Aug. 2, the holdings more than doubled.

The rally in gold may stall should central banks in Europe resume selling bullion reserves, some traders said.

`Deleterious Effect'

``It will have some deleterious effect,'' Kaplan said.

Central banks, mainly in the U.S. and Europe, hold almost a fifth of the world's gold as a reserve asset. Gold has rallied from a 20-year low of $253.20 an ounce in 1999 partly because 15 central banks in Europe, including Germany, agreed to limit their annual bullion sales to 400 tons through 2004. The banks, under a second agreement that began last year, increased the limit to 500 tons. Central banks were allowed to resume sales on Sept. 27 under the accord.

Some analysts said the impact of the sales will be minimal.

``The program has been well telegraphed, and the style of their selling is in bits and pieces, so I don't think it's a big threat,'' Guido said.

To contact the reporter on this story: Pham-Duy Nguyen in Seattle at pnguyen@bloomberg.net

Last Updated: September 29, 2005 14:11 EDT