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Gold, Silver Rise as Europe’s Debt Concerns Boost Haven Demand

Gold futures rose as Europe’s mounting fiscal woes boosted the appeal of precious metals as a haven. Silver prices climbed 2 percent.

Irish and Spanish government bonds slumped for the 13th straight session, and the euro dropped on escalating concern that countries will be forced to restructure their debt. Gold has gained 28 percent this year, reaching a record $1,424.30 an ounce on Nov. 9, on bets the Federal Reserve’s plan to buy back more bonds will erode the value of the dollar.

“The re-emergence of sovereign risk should ultimately help the yellow metal,” Edel Tully, an analyst at UBS AG in London, said in a report.

Gold futures for December delivery rose $4, or 0.3 percent, to settle at $1,403.30 at 2 p.m. on the Comex in New York.

Silver futures for December delivery climbed 54 cents to $27.405 an ounce. Yesterday, the metal plunged 7.1 percent, the most since Dec. 1, 2008. On Nov. 9, the price reached $29.34, a 30-year high.

France backed Germany’s efforts to make investors share the costs of restructuring sovereign debt. Spain’s economy stalled and Ireland’s fiscal crisis drove down bank stocks. Gold priced in euros reached a record in June, when investors were concerned that Greece may go bankrupt.

‘Inexorably Higher’

Dennis Gartman, an economist and the editor of the Suffolk, Virginia-based Gartman Letter, recommended holding gold denominated in other currencies to hedge against the relative strength in the dollar.

“The trend is inexorably toward higher gold prices in euro terms,” Gartman said. “The buyers of gold at the margin are the sellers of euros, too.”

The dollar rose for the fifth straight session against a basket of major currencies including the euro.

Gold also gained after a report showed China’s inflation accelerated to a two-year high.

“Rising inflation is one of the single biggest factors driving China’s appetite for gold,” Tully of UBS said.

Gold’s gains may be limited in the short term should the dollar extend a rally, analysts at Bank of America Merrill Lynch said today in a report.

“A recovery of the U.S. currency, for instance because of concerns over debt in Europe, may remove price support to metals,” Bank of America Merrill Lynch said.

Platinum futures for January delivery rose $7.90, or 0.5 percent, to $1,745.80 an ounce on the New York Mercantile Exchange.

Palladium futures for December delivery rose $7.40, or 1.1 percent, to $704.15 an ounce.

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