Gold Fluctuates Near Seven-Week High on Libya, Inflation Concern

Gold fluctuated near a seven-week high in New York as continuing violence in Libya and concern that inflation will accelerate boosted demand for the metal as an alternative investment.

Loyalists of Libyan leader Muammar Qaddafi sought to crush dissent in Tripoli as opponents tightened control of eastern cities and U.S. President Barack Obama called for international pressure on the regime to end its attacks. Bullion traded within 1 percent of its December record as oil prices advanced.

“Gold is poised to challenge December’s all-time high,” James Moore, an analyst at TheBullionDesk.com in London, said in a report. “The mix of safe-haven demand, inflation concerns and strong retail demand continues to support higher prices.”

Gold futures for April delivery added as much as $4.50, or 0.3 percent, to $1,418.50 an ounce, the highest price since Jan. 3, and were at $1,418.30 at 8:11 a.m. on the Comex in New York. Prices also slipped as much as 0.4 percent. The metal for immediate delivery in London was 0.4 percent higher at $1,417.26.

Bullion rose to $1,414.50 an ounce in the morning “fixing” in London, used by some mining companies to sell output, from $1,409.25 at yesterday’s afternoon fixing.

Libya’s revolt is raising speculation climbing fuel costs will spur inflation. The United Nations’ World Food Price Index gained to a record last month. Minutes of the Bank of England’s most recent meeting showed a third policy maker voted for raising interest rates to curb inflation that’s running at twice the bank’s target.

Record High

Concern about rising inflation and currency debasement drove gold prices up 30 percent last year for a 10th annual gain, lifting futures to a record $1,432.50 an ounce on Dec. 7. Increasing food and commodity prices have contributed to uprisings in the Middle East and North Africa.

Libya is the latest country in the region to be rocked by protests ignited by last month’s ouster of Tunisia’s president and fanned by the Feb. 11 fall of the Egyptian president. With Qaddafi employing more force to quash revolts than leaders in other Arab countries engulfed by mass demonstrations, analysts said the country may descend into civil war. Oil surged to $100 a barrel in New York for the first time in two years.

“Escalating unrest in Libya and rising oil prices have encouraged gold safe-haven buying and fueled concerns over inflation, which also benefits gold,” Mark Pervan, senior analyst with ANZ Banking Group Ltd., wrote in a note.

ETP Holdings

Gold held in exchange-traded products rose 0.6 metric ton to 2,015.39 tons yesterday, rebounding from 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 ETP assets advanced 61.39 tons to 14,713.45 tons, the highest level since Jan. 21, data from four providers show.

Silver for May delivery in New York added 0.5 percent to $33.48 an ounce. It climbed to $34.315 on Feb. 22, the highest price since March 1980, the year futures reached a record $50.35.

Palladium for June delivery fell 0.7 percent to $771.05 an ounce. It tumbled 3.9 percent yesterday and touched a 10-year high of $863.70 on Feb. 22. Platinum for April delivery was 0.4 percent higher at $1,783.10 an ounce.

To contact the reporters on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net; Kyoungwha Kim in Singapore at kkim19@bloomberg.net

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