Gold Climbs to Record on Speculation Currencies Will Weaken; Silver Gains

Gold rose to another record and silver gained to a 30-year high on speculation government spending will erode the dollar and boost demand for metals as alternative assets. Palladium reached the highest price since March 2008.

The dollar fell to the lowest level since January against a basket of major currencies after a private report based on U.S. payrolls showed job losses in September. Gold futures reached $1,351 an ounce, the highest ever. Central banks have boosted debt purchases and slashed interest rates, damping the allure of bonds and cash.

“The magnitude of broad-based currency weakness has raised the fear of competitive devaluation by gold traders, who continue to see gold as the alternative currency,” said Tom Pawlicki, an analyst at MF Global Holdings Ltd. in Chicago.

Gold futures for December delivery gained $7.40, or 0.6 percent, to settle at $1,347.70 at 1:46 p.m. on the Comex in New York. Since Sept. 14, the metal has climbed to a record in 13 sessions.

Gold for immediate delivery reached a record $1,349.80. Before today, the metal surged 22 percent this year, heading for the 10th straight annual gain and the longest rally since at least 1920.

The Fed has kept its benchmark interest rate at zero percent to 0.25 percent since December 2008 to revive the economy. The central bank also purchased $1.25 trillion in mortgage-backed securities.

‘Fiat-Currency Weakness’

“The potential for additional quantitative easing and the likelihood of continued fiat-currency weakness bolsters our desire to own gold, despite prices already trading at record highs,” Morgan Stanley said yesterday in a report. In 2011, gold may average $1,315 in “our base case” and $1,512 in “our bull case,” the bank said.

The metal has outperformed global equities and Treasuries this year, prompting record investment in gold-backed exchange- traded products. Yields on Treasury two- and five-year notes fell to record lows.

Gold assets in ETPs rose 0.6 metric ton to 2,094.9 tons as of Oct. 5, according to data from 10 providers. Holdings are up 17 percent this year and reached an all-time high of 2,097.01 tons on Sept. 30.

Silver futures for December delivery rose 30.6 cents, or 1.3 percent, to $23.043 an ounce on the Comex. Earlier, the price reached $23.09, the highest level since Sept. 26, 1980.

Platinum futures for January delivery gained $11.30, or 0.7 percent, to $1,712 an ounce on the New York Mercantile Exchange.

Palladium futures for December delivery climbed $11.45, or 2 percent, to $589.65 an ounce. Earlier, the metal rose to $594, the highest price since March 4, 2008.

To contact the reporters on the story: Pham-Duy Nguyen in Seattle at pnguyen@bloomberg.net; Claudia Carpenter in London at ccarpenter2@bloomberg.net.

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net

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