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Gold Extends Advance; Silver Soars to Highest Since March 2008

Gold climbed in New York as weaker German investor confidence stoked concern the economic recovery is stalling and as yesterday’s decline in the dollar boosted demand. Silver gained to the highest price since March 2008.

The dollar was 0.3 percent higher against the euro as reports showed German investor confidence fell more than economists forecast to a 19-month low in September and European industrial output stagnated. The greenback yesterday dropped 1.6 percent, the biggest decline in almost two months. Gold, which typically moves inversely to the U.S. currency, is trading 0.7 percent below a record.

Concern about a slowing recovery “is another reason why people may buy gold,” said Afshin Nabavi, a senior vice president at bullion refiner MKS Finance SA in Geneva. “Overnight, the weaker dollar gave some helping hand to gold. Gold still has an eye on the dollar.”

Gold futures for December delivery added as much as $11.90, or 1 percent, to $1,259 an ounce and traded at $1,260.70 at 8:33 a.m. on the Comex in New York. Bullion for immediate delivery in London was 1.1 percent higher at $1,259.65.

The metal rose to $1,253.25 in the morning “fixing” in London, used by some mining companies to sell output, from $1,243.75 at yesterday’s afternoon fixing.

The ZEW Center for European Economic Research in Mannheim said its index of investor and analyst expectations dropped to minus 4.3 from 14 in August. That’s the fifth monthly decline and the lowest since February 2009. Economists had forecast a reading of 10, according to the median of 36 estimates in a Bloomberg News survey. European industrial output stagnated in July, according to a European Union report today.

Asian Demand

Bullion is set for a 10th annual gain. Futures reached a record $1,266.50 on June 21 as investors sought protection against financial turmoil in Europe and the prospect of slowing economic growth. Gold, traditionally a hedge against rising consumer prices, rallied 15 percent since the start of January even as U.S. inflation slowed.

Gains in U.S. consumer prices excluding food and fuel have slowed to 0.9 percent, matching a 44-year low. The overall U.S. consumer price index will average 1.5 percent in 2011, down from 1.6 percent this year, according to the median of 55 economists surveyed by Bloomberg this month.

“With these dips in prices from the $1,260 levels to $1,240 levels, we continue to see decent physical demand out of Asia,” said Walter de Wet, an analyst at Standard Bank Plc in London. Futures last week reached a two-month high of $1,264.70.

Silver’s Advantage

Gold holdings in the SPDR Gold Trust, the biggest exchange-traded fund backed by bullion, declined 0.91 metric ton to 1,292.62 tons yesterday, according to the company’s website. Holdings reached a record 1,320.44 tons in June.

Silver for December delivery in New York added as much as 1.5 percent to $20.445 an ounce, the highest price since March 18, 2008, and was last at $20.34. The metal has gained 21 percent this year. Industrial applications including electrical conductors and batteries account for about half of silver demand.

An ounce of gold bought as little as 61.4492 ounces of silver today in London, the lowest amount since January, according to Bloomberg data.

Silver is “carrying industrial properties that is likely to see the metal benefiting from a global economic recovery, just like platinum-group metals,” Andrey Kryuchenkov, an analyst at VTB Capital in London, said today in a report.

Platinum for October delivery rose as much as 1.5 percent to $1,573.50 an ounce, the highest price since Aug. 9, and last traded at $1,571.10. Palladium for December delivery reached a four-month high of $546.45 an ounce and was last up 2 percent at $540.55.

Northam Platinum Ltd. said on Sept. 6 a pay strike at its Zondereinde mine in South Africa is costing about 9 million rand ($1.26 million) per day in lost revenue. About 80 percent of the mine’s 6,800 permanent employees started a strike with the night shift on Sept. 5, Northam said.

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