Gold Advances to Record, Silver Tops $41 Per Ounce on Inflation Concerns

Gold climbed to a record and silver topped $41 an ounce, gaining for a ninth straight day in the best run since March 2008, as investors sought precious metals as hedges against accelerating inflation.

Immediate-delivery bullion gained as much as 0.2 percent to $1,478.18 an ounce and traded at $1,473.72 at 3:18 p.m. in Singapore. Gold for June in New York climbed as much as 0.3 percent to $1,478 an ounce, also an all-time high. Cash silver advanced as much as 2.5 percent to $41.9525 an ounce, the highest level since 1980, before trading at $41.5525 an ounce.

“Commodities across the board are rallying, aggravating the inflation outlook,” said Chae Un Soo, a Seoul-based trader at KEB Futures Co. “For now, more and more investors are looking to precious metals as a shelter.”

The Standard & Poor’s GSCI Spot Index of 24 raw-materials futures reached 760.81 points on April 8, the highest level since Aug. 4, 2008. Crude touched a 30-month high of $113.46 per barrel today amid fighting in Libya and unrest in the Middle East. The European Central Bank last week raised borrowing costs from a record low to fight accelerating prices.

The difference between yields on U.S. 10-year notes and Treasury Inflation Protected Securities, a gauge of traders’ expectations for inflation, widened to as much as 2.64 percentage points last week, the most since March 2008. The Federal Reserve has kept the benchmark rate at zero percent to 0.25 percent since December 2008 to stimulate growth. The ECB raised the main interest rate 25 basis points to 1.25 percent.

Gold strengthened 3.8 percent this year after rallying 30 percent in 2010 on the prospect of currency debasement and rising inflation. The fighting in the Middle East, a nuclear crisis in Japan and European sovereign-debt problems have also bolstered demand for precious metals.

Survey Outlook

Fifteen of 18 traders, investors and analysts surveyed by Bloomberg, or 83 percent, said that bullion will rise this week. Two predicted lower prices and one was neutral. Hedge-fund managers and other large speculators increased their net-long position in New York gold futures in the week ended April 5, according to U.S. Commodity Futures Trading Commission data.

Speculative long positions, or bets prices will rise, outnumbered short positions by 204,706 contracts on the Comex division of the New York Mercantile Exchange, the commission said in its Commitments of Traders report. Net-long positions rose by 11,585 contracts, or 6 percent, from a week earlier.

The dollar has come under pressure as “the easy monetary policy of the Federal Reserve is a contrast against the gradual tightening stance taken by other central banks,” said Ong Yi Ling, Singapore-based analyst with Phillip Futures Pte. “A weak dollar increases the appeal of gold as a currency alternative.”

Dollar Index

The Dollar Index, a six-currency gauge of the dollar’s value, fell 0.2 percent, trading near the lowest level since December 2009. Gold typically moves inversely to the dollar.

Investors regard silver as “a cheap vehicle” similar to gold as a store of value, Morgan Stanley said in a report last week. The metal will average $31.39 an ounce this year, up 20 percent from a previous forecast, the bank said.

Immediate-delivery palladium climbed 0.6 percent to $801.25 an ounce, while platinum weakened 0.3 percent to $1,809 an ounce.

To contact the reporter on this story: Kyoungwha Kim in Singapore at kkim19@bloomberg.net

To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net

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