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Gold Surges to Record on European, U.S. Debt Concerns, Currency Gyrations

Gold rose to a record in New York on speculation that the sovereign-debt crisis in Europe will worsen, boosting the appeal of the precious metal as an alternative to currencies. Silver touched a 31-year high.

Gold reached an all-time high of $1,489.10 an ounce after Moody’s cut Ireland’s credit rating by two levels to the lowest investment grade, eroding the value of the euro. The dollar, while up today, is headed for a third straight weekly decline against a basket of currencies as the U.S. Congress debates measures to reduce a record government deficit.

“Gold has become the currency of choice,” said Lannie Cohen, the president of Capitol Commodity Services Inc. in Indianapolis. “The debt crises in Portugal and Ireland are getting worse. The U.S. has its own deficit problems. There’s just so much debt that the U.S. will have to continue quantitative easing to carry the deficit.”

Gold futures for June delivery rose $13.60, or 0.9 percent, to settle at $1,486 at 1:46 p.m. on the Comex, up 0.8 percent for the week. Gold for immediate delivery in London rose as much as 0.9 percent to a record $1,488.18.

The precious metal may rise to $1,750 this year in anticipation of “the dollar getting ready to fall off the face of the earth,” Cohen said.

Photographer: Qilai Shen/Bloomberg

Gold is set for a second weekly climb, taking gains in the past year to 27 percent. Close

Gold is set for a second weekly climb, taking gains in the past year to 27 percent.

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Photographer: Qilai Shen/Bloomberg

Gold is set for a second weekly climb, taking gains in the past year to 27 percent.

The Federal Reserve has kept its benchmark interest rate at zero percent to 0.25 percent since December 2008 and has pledged to buy $600 billion in Treasuries through June to stimulate growth.

Inflation Concern

Gold also rallied on demand from investors seeking a hedge against inflation.

Consumer prices in China, the world’s fastest-growing major economy, rose 5.4 percent in March, the quickest pace since 2008, exceeding the government’s 2011 target for a third month.

Inflation in the 17-nation euro region quickened to 2.7 percent in March from 2.4 percent in February, the European Union’s statistics office said today. U.S. wholesale costs climbed 5.8 percent in March compared with a year earlier, and the government said today that the cost of living rose for a ninth straight month.

“The inflationary numbers in the backdrop are very bullish for gold,” said Adam Klopfenstein, a senior market strategist at Lind-Waldock in Chicago. “With the sovereign-debt problems in Europe and the U.S., investors want metals to protect them.”

Silver Surges

Silver topped $42, pushing its gain this year to 38 percent, the most among the 19 commodities tracked by the Thomson Reuters/Jefferies CRB Index.

Silver futures for May delivery rose 90.7 cents, or 2.2 percent, to $42.571 an ounce on the Comex in New York. Earlier, the price climbed to $42.865, the highest since 1980, when the metal reached a record $50.35.

The commodity advanced 4.8 percent this week, the fourth straight increase.

Palladium futures for June delivery fell $6.15, or 0.8 percent, to $768.10 an ounce on the New York Mercantile Exchange. Prices dropped 3.3 percent this week.

Platinum futures for July delivery declined 80 cents to $1,794.80 an ounce on the Nymex, capping a 1 percent loss for the week.

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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