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Gold Rallies Most in 10 Weeks on Iran, Dollar

Gold futures jumped the most in 10 weeks on demand for a haven following a report that Iran produced its first nuclear-fuel rod. Silver surged the most in five months as the dollar’s decline spurred a commodity rally.

A domestically-made rod was inserted into the core of Tehran’s atomic-research reactor, the Iranian Students News Agency said yesterday. The dollar fell against a basket of currencies as global manufacturing expanded, spurring demand for raw materials perceived as riskier assets. Blackstone Group LP’s Byron Wien, who correctly predicted last year’s gain in gold, said the metal will rally 15 percent in 2012 to $1,800 an ounce.

“Fear trade is back because of Iran,” Adam Klopfenstein, a market strategist at Archer Financial Services Inc. in Chicago, said in a telephone interview. “Also, we are seeing buying across commodities because of the weaker dollar.”

Gold futures for February delivery climbed 2.2 percent to settle at $1,600.50 at 1:38 p.m. on the Comex in New York, the biggest gain for a most-active contract since Oct. 25.

The price rallied 10 percent last year, the 11th straight annual advance.

“Accommodative monetary policies throughout the developed world cause a renewed migration to hard assets by individual investors and sovereign-wealth funds,” Wien of Blackstone said today in a report.

Last month, the metal slumped 10 percent, touching a five- month low of $1,523.90 on Dec. 29.

Hedge funds and other money managers cut bets on higher prices for gold futures by 4.5 percent to 111,919 contracts in the week ended Dec. 27, the lowest since January 2009, U.S. Commodity Futures Trading Commission data show.

‘Upside Potential’

The drop in bullish bets is “suggesting plenty of upside price potential once sentiment improves,” James Moore, an analyst at TheBullionDesk.com in London, said in a report.

Silver futures for March delivery jumped 5.9 percent to $29.572 an ounce on the Comex, the biggest increase since July 13 and the leading advance among 24 raw materials in the Standard & Poor’s GSCI Spot Index.

Silver will rise to $40 this year, Wien of Blackstone said.

On the New York Mercantile Exchange, palladium futures for March delivery climbed 1.1 percent to $663.50 an ounce. Platinum futures for April delivery advanced 2 percent to $1,432.50 an ounce.

To contact the reporters on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net; Debarati Roy in New York at droy5@bloomberg.net

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

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