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Gold Futures Surge to Record on Demand for Haven Amid Middle East Turmoil

Gold rose to a record of $1,435.60 an ounce in New York as unrest in Libya spurred demand for the metal as an investment haven.

Libya’s opposition gained support from the U.S. and European nations as Muammar Qaddafi sent forces to regain lost territory. Protests spread in the region, partly because food prices have soared. Crude oil in New York topped $100 a barrel today as Iranian protesters clashed with security forces in Tehran. Gold rose for the 10th time in 11 sessions.

“The continued violence in the Middle East is bringing in new buyers and spurring gold to new territory,” said Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago. “The rush to economic health is fading. Crude above $100 is an energy tax that will force governments to put more money into the system. Our old fear of stagflation returns.”

Gold futures for April delivery reached the all-time high after the close of regular trading on the Comex in New York. The metal had settled up $21.30, or 1.5 percent, at $1.431.20 at 1:49 p.m. The previous intraday record was $1,432.50 on Dec. 7.

Gold for immediately delivery rose as much as 1.7 percent to a record of $1,434.93. The price climbed 1.6 percent to $1,434.27 at 4:01 p.m. New York time.

In 2010, accelerating inflation and escalating sovereign debt drove gold up 30 percent, the 10th straight annual gain. Today, the Thomson Reuters/Jefferies CRB Index of 19 raw materials also rose to the highest since September 2008.

Bernanke, Inflation

Federal Reserve Chairman Ben S. Bernanke said today the surge in oil and other commodity prices probably won’t cause a permanent increase in broader inflation. He repeated that U.S. borrowing costs are likely to stay low.

Asian countries from China to Indonesia have raised interest rates this year to curb inflation after governments across the globe spent more than $2 trillion to jumpstart their economies.

“We’ll see gold catch a bit of steam and cover new ground to the upside very quickly,” said Matthew Zeman, a metal trader at LaSalle Futures Group in Chicago. “This is about geopolitical risk and the possibility of skyrocketing oil prices wreaking havoc on a relatively fragile economy.”

A United Nations measure of global food prices rose to a record in January. Costs have surged to “dangerous levels,” pushing 44 million people into extreme poverty since June, the World Bank said in February.

The European Union yesterday imposed an arms embargo and other sanctions on Libya, while the U.S. said it has frozen $30 billion in the country’s assets. The UN estimates that more than 1,000 people have died in the uprising.

‘Fear’ Trade

“The continued instability overseas has brought the ‘fear’ trade back to gold,” said Adam Klopfenstein, a senior strategist at Lind-Waldock in Chicago. “Gold and silver are the big beneficiaries of the fear and uncertainty. Investors want to buy first and ask questions later.”

In Africa and the Middle East, unrest that started in Tunisia in January spread to Egypt, Bahrain, Iran and Yemen. Libya has Africa’s largest oil reserves, and Iran is the second- biggest producer in the Organization of Petroleum Exporting Countries behind Saudi Arabia.

“The current situation there is akin to a keg of dynamite,” said Ong Yi Ling, a Singapore-based analyst at Phillip Futures Pte Ltd. “As the political uncertainty prompts a wave of risk aversion, gold is back in demand as a safe haven.”

Silver futures for May delivery gained 60.7 cents, or 1.8 percent, to close at $33.82 an ounce on the Comex. In electronic trading after the settlement, the price reached $34.685, the highest since March 1980. In that year, the metal climbed to a record of $50.35.

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

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

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