Gold Extends Rally to Record Amid Inflation Concerns, Middle East Turmoil

Gold rose to a record for the second straight day on mounting demand for an investment haven amid surging commodity prices and turmoil in Libya. Silver climbed to the highest since 1980.

In New York, gold futures reached $1,441 an ounce, the highest ever. Crude oil topped $102 a barrel as Libyan rebels braced for renewed clashes with forces loyal to Muammar Qaddafi. The Thomson Reuters/Jefferies CRB Index of 19 raw materials rose to the highest since September 2008.

“People are buying gold because they believe that commodity inflation is coming,” said Leonard Kaplan, the president of Prospector Asset Management in Evanston, Illinois. “The geopolitical tension in the Middle East is forcing the price of oil into the atmosphere, and that is going to derail the economy.”

Gold futures for April delivery rose $6.50, or 0.5 percent, to settle at $1,437.70 at 1:42 p.m. on the Comex in New York. The metal, up for the 11th time in 12 sessions, has gained 26 percent in the past 12 months.

Silver futures for May delivery rose 40.8 cents, or 1.2 percent, to $34.835 an ounce. Earlier, the metal reached $34.975, the highest since March 7, 1980. In that year, the record was $50.35. The commodity has doubled in the past 12 months.

Libyan forces loyal to Qaddafi attacked rebels in the coastal region, where much of the country’s crude oil is refined or shipped abroad, and the leader said his control of petroleum reserves is secure. Western powers are debating how to stop the attacks as two U.S. Navy ships head toward the northern Africa country.

Saudi Spending

In Africa and the Middle East, unrest that started in Tunisia in January spread to Egypt, Bahrain, Iran and Yemen. Governments in the region, including the royal family in Saudi Arabia, the holder of the world’s biggest oil reserves, have announced increased spending on social programs, such as food and energy subsidies and job creation plans, to quell protests.

“Given the continuing strong fundamentals and the concerns of geopolitical instability spreading to Saudi Arabia and other autocratic oil-producing nations, gold and silver look set to challenge $1,500 and $40 in the coming weeks,” analysts at Goldcore Ltd. in Dublin said in an e-mail.

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.

Bernanke, Inflation

Federal Reserve Chairman Ben S. Bernanke said yesterday that 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.

Dennis Gartman, an economist and the editor of the Suffolk, Virginia-based Gartman Letter, recommends holding gold in non- U.S. currencies.

“In doing so, we are hedged against disaster and further diminution of fiat currencies,” Gartman said in his report.

Palladium futures for June delivery climbed $5.95, or 0.7 percent, to $822.65 an ounce on the New York Mercantile Exchange. The price has jumped 85 percent in the past 12 months.

Platinum futures for April delivery gained $14.20, or 0.8 percent, to $1,859.30 an ounce. The metal has gained 18 percent in the past year.

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

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

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