Gold Fluctuates Near 4-Week High on Inflation, Rate Concerns

Gold fluctuated in New York after reaching a four-week high as investors weighed concerns that China will move to cool its economy as global inflation accelerates.

China’s consumer prices increased to 4.9 percent in January, exceeding the government’s target for a fourth month, while U.K. inflation accelerated to the fastest pace in more than two years, data showed yesterday. China’s interest-rate swaps rose for a second day on speculation the central bank will tighten monetary policy further. Protests in Yemen continued and there were reports that unrest spread to Libya.

“Support will continue to come from increases in inflation, growing investment,” Tom Pawlicki, an analyst at MF Global in Chicago, said today in a report. “Opposing pressure will be offered by potential tightening in China.”

Gold futures for April delivery added as much as $4.40, or 0.3 percent, to $1,378.50 an ounce, the highest price since Jan. 19, and were at $1,375 at 7:58 a.m. on the Comex in New York. Prices gained and lost as much as 0.3 percent. The metal for immediate delivery in London was 0.1 percent higher at $1,374.59.

Bullion rose to $1,374.50 an ounce in the morning “fixing” in London, used by some mining companies to sell output, from $1,372.75 at yesterday’s afternoon fixing.

Concern about rising inflation and currency debasement drove prices up 30 percent last year, setting a record $1,432.50 in December. China last week joined India, Indonesia, Thailand and South Korea in boosting interest rates as policy makers sought to cool the economies leading a global rebound.

Mass Demonstration

India’s benchmark wholesale-price index rose 8.23 percent in January, Indonesia’s inflation is 7 percent and South Korea’s is 4.1 percent, the latest government data show. The Bank of England today forecast inflation will accelerate further from a two-year high and peak at about 4.4 percent before easing to its 2 percent target by the middle of 2012.

“Tensions in the Middle East will continue to be an issue,” MF Global’s Pawlicki said. Gold gained the previous two weeks as mass demonstrations in Egypt forced President Hosni Mubarak to cede power to the army.

Yemen Protests

In Yemen, hundreds of protesters took to the streets for a sixth day, marching to demand the immediate resignation of the president of 32 years, Ali Abdullah Saleh. Hundreds of protesters in Libya, where Muammar Qaddafi has held power since leading a military coup in 1969, gathered in the port city of Benghazi demanding the overthrow of the government, the Associated Press reported.

Gold held in exchange-traded products fell 3.21 metric tons to 2,016.98 tons yesterday, the lowest level since June 7, data compiled by Bloomberg from 10 providers show. Holdings reached a record 2,114.6 tons in December.

Silver for March delivery in New York added 0.3 percent to $30.775 an ounce. Palladium for March delivery was little changed at $839.35 an ounce, after yesterday reaching $848.50, the highest level since March 2001. Platinum for April delivery was 0.1 percent higher at $1,834 an ounce.

“We are seeing continued reshuffling within the sector to more cyclically sensitive precious metals,” Carsten Fritsch, a Frankfurt-based analyst at Commerzbank AG, said today in a report. “Rising commodity prices alongside a reviving economy and ample liquidity suggest higher inflation risks in the long term, from which precious metals should benefit.”

To contact the reporter on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net

To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net.