Gold Gains to Record on Wealth Demand; Silver Near 30-Year High

Gold climbed to a record for the third time this week as investors stepped up demand for a haven from financial turmoil. Silver futures rose to the highest closing price since 1980.

This year, gold has gained 17 percent, and silver has jumped 24 percent, outperforming stocks, bonds and many commodities as sovereign-debt concerns and an uneven economic recovery roil financial markets.

“Gold is accelerating,” said Adam Klopfenstein, a senior market strategist at Lind-Waldock in Chicago. “We’re getting to a point where the public is getting spooked by the instability in financial markets. Gold is going to be the asset of choice when investors are seeking safe havens.”

Gold futures for December delivery rose $3.70, or 0.3 percent, to close at $1,277.50 an ounce at 1:45 p.m. on the Comex in New York. Earlier, the metal reached a record $1,284.40.

Silver futures for December delivery rose 4.5 cents, or 0.2 percent, to settle at $20.816 an ounce, the highest closing price for a most-active contract since Oct. 16, 1980. Earlier, the price reached a 30-month intraday high of $21.025.

“When gold is in a very steady uptrend, at some point” investors will start buying the cheaper silver, said Jesper Dannesboe, a senior commodity strategist at Societe Generale SA in London. “You can get a massive speculative move into silver, and it can last for a couple of months.”

Photographer: Jean Chung/Bloomberg

Gold for immediate delivery advanced 0.4 percent to an all-time high of $1,280.80 an ounce and traded at $1,280.75 an ounce at 3:01 p.m. in Singapore. Close

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Photographer: Jean Chung/Bloomberg

Gold for immediate delivery advanced 0.4 percent to an all-time high of $1,280.80 an ounce and traded at $1,280.75 an ounce at 3:01 p.m. in Singapore.

Dollar Slumps

Governments have spent trillions of dollars and reduced borrowing costs to record lows in a bid to revive the global economy. This week, the Bank of Japan sold the yen for the first time in six years because the currency’s surge to a 15-year high against the dollar imperiled the nation’s export-led recovery.

The Obama administration forecasts this year’s deficit will widen to a record $1.47 trillion. The Federal Reserve has kept the benchmark lending rate from zero percent to 0.25 percent since December 2008 and is expected to resume direct purchases of Treasuries to boost the economy.

“All the debt and deficits are so high, the only perceived way out of this mess is a global synchronized devaluation of all fiat currencies,” said Michael Pento, a vice president at Euro Pacific Capital Inc. in New York. “Gold is replacing the dollar as the world’s reserve currency.”

Gold for immediate delivery rose to a record $1,282.97. Goldman Sachs Group Inc. affirmed a forecast for the metal to reach $1,300 in six months.

Global holdings of gold by exchange-traded products reached a record 2,081.38 metric tons on Sept. 1 and were little changed yesterday at 2,077.9 tons, according to Bloomberg data from 10 providers. Global silver ETP assets were unchanged at 13,211.9 tons yesterday, the highest level in at least seven months, data from four providers showed.

Tame Inflation

Prices have gained this year amid tame U.S. inflation. Traditionally, gold is a hedge against rising consumer prices. Inflation expectations, based on the 10-year U.S. Treasury breakeven rate, have fallen to 1.8 percent from 2.25 percent six months ago.

Still, investors should be cautious about buying gold at record prices, said Klopfenstein at Lind-Waldock.

“The higher gold goes, the more it’s going to hurt when the rubber band snaps back,” he said. “I wouldn’t blindly enter the market at these prices. Investors need to have some risk management when they buy at these levels.”

Platinum futures for October delivery rose $10, or 0.6 percent, to $1,621.90 an ounce on the New York Mercantile Exchange.

Palladium futures for December delivery fell $3.65, or 0.7 percent, to $545.70 an ounce.

To contact the reporters on this story: Pham-Duy Nguyen in Seattle at pnguyen@bloomberg.net; Nicholas Larkin in London at nlarkin1@bloomberg.net.

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