Gold Rises to Record $1,458.60 on Ounce on ‘Chaos' Hedge; Silver Tops $39

Gold futures surged to a record of $1,458.60 an ounce as sovereign-debt concerns boosted demand for the precious metal as an alternative asset. Silver prices topped $39 an ounce.

The cost of insuring Portugal’s debt rose to an all-time high. The conflict in Libya and the nuclear crisis in Japan spurred demand for gold as an investment haven. The metal has jumped 28 percent in the past year, and silver more than doubled.

“There’s still turmoil in the Middle East, uncertainty in Japan and possible sovereign-debt defaults,” said Adam Klopfenstein, a senior strategist at Lind-Waldock, a broker in Chicago. “There’s still demand for gold and silver as a hedge against chaos.”

Gold futures for June delivery rose $19.50, or 1.4 percent, to settle at $1,452.50 at 1:43 p.m. on the Comex in New York, the highest closing price ever. The metal extended its rally to a record after the end of regular trading.

Gold for immediate delivery rose as much as 1.6 percent to an all-time high of $1,457.45.

Federal Reserve Chairman Ben S. Bernanke yesterday said that inflation must be watched “extremely closely,” spurring bets that interest rates may be raised sooner than analysts expected. The European Central Bank has signaled it is ready to raise borrowing costs this week. Today, China raised rates for the fourth time since mid-October to restrain increasing consumer prices.

Inflation Bite

“Once a central bank goes down the expansionary path to fight recession, it is much easier to keep pumping money than to reverse course when inflation starts to bite into purchasing power,” said Michael Pento, a senior economist at Euro Pacific Capital Inc. in New York.

The Fed has kept its benchmark rate at zero percent to 0.25 percent since December 2008 to stimulate the economy. President Barack Obama is negotiating with congressional leaders to prevent a government closure as the budget deficit soars.

“What’s looming ahead is the fear that if there is a shutdown in government, who’s going to want to own paper currency?” Klopfenstein of Lind-Waldock said.

Dennis Gartman, an economist and the editor of the Suffolk, Virginia-based Gartman Letter, told clients to sell Japanese equities and buy gold.

Japanese stocks fell the most in three weeks after Tokyo Electric Power Co. began dumping radioactive water from its Fukushima Dai-Ichi nuclear station into the sea.

The previous intraday record for gold was $1,448.60 on March 24.

Silver, Palladium

Silver futures for May delivery climbed 68.9 cents, or 1.8 percent, to settle at $39.183 on the Comex. After the close of regular trading, the price reached $39.33, the highest since February 1980. That year, the metal soared to a record of $50.35.

Palladium futures for June delivery advanced $8.70, or 1.1 percent, to $793.10 an ounce on the New York Mercantile Exchange. The price has gained 56 percent in the past 12 months.

Platinum futures for July delivery rose $9.80, or 0.5 percent, to $1,796.80 an ounce. The metal has increased 5.1 percent in the past year.

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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