Gold May Gain on Weaker Dollar, Inflation Concern; Silver Climbs

Gold may gain for a second day in New York as a weakening dollar and concern about inflation boost demand for the metal as an alternative investment. Silver rose to within 1.4 percent of a 31-year high.

The dollar today touched a 16-month low against six major currencies on speculation the Federal Reserve will lag behind the European Central Bank in raising interest rates. Data this week may show European and Chinese inflation quickened last month. Concerns about Japan’s nuclear disaster, fighting in Libya and European debt helped gold reach a record $1,478 an ounce on April 11. Gold typically moves inversely to the dollar.

Concerns about the “Middle East and North Africa, euro-zone debt and inflation continue to underpin” prices, James Moore, an analyst at in London, said today in a report to clients. “The weaker dollar is set to drive” gold to $1,500 and silver to $45 an ounce, he said.

Gold futures for June delivery rose $2.40, or 0.2 percent, to $1,458 an ounce at 7:58 a.m. on the Comex in New York. The metal for immediate delivery in London was little changed at $1,457.28. Spot prices reached a record $1,478.18 on April 11.

The U.S. Dollar Index was little changed after earlier today dropping as much as 0.5 percent.

Silver for May delivery in New York climbed as much as 2.9 percent to $41.40 an ounce and was last at $40.735. It rose to $41.975 on April 11, the highest level since January 1980, when futures reached a record $50.35.

Gold’s 2.6 percent gain this year has lagged behind the 32 percent surge for silver, which is used more in industry than gold. An ounce of gold bought as little as 35.16 ounces of silver on April 11, the least since 1983, data compiled by Bloomberg show.

Asian Interest

Euro-region consumer prices rose 1.3 percent in March from the previous month, when they gained 0.4 percent, economists surveyed by Bloomberg News expect a report tomorrow to show. China’s inflation accelerated to 5.2 percent last month, exceeding the government’s 2011 target of 4 percent for the third month this year, a survey showed. The Bank of Korea yesterday raised the inflation forecast for South Korea.

“Gold could be supported by some buying interest from Asian countries,” said Ong Yi Ling, a Singapore-based analyst with Phillip Futures Pte. “Amid high inflation and a lack of investment alternatives, gold could be sought out as a store of value and hedge against inflation.”

Aftershocks rattling Japan after the nation’s record quake on March 11 may continue for at least six months, increasing the risk of more damage to the crippled Fukushima Dai-Ichi nuclear plant, said the University of Tokyo’s Earthquake Research Institute. Tokyo Electric Power Co. estimates the fight to stabilize reactors will last through June.

Libya Conflict

Libyan rebels want to borrow at least $2 billion to buy food, medicine, fuel and perhaps weapons as their foreign allies agreed on the need to do more to help them prevail over Muammar Qaddafi’s forces. Libya has been effectively split in two since the early stages of the two-month conflict, a division that has helped push oil prices above $100 a barrel in New York.

HSBC Global Asset Management increased its gold holdings to 6 percent from 3 percent at the beginning of this quarter. Gold at $2,600 is a “reasonable fair value target” when measured against commodities, real estate, money supply and wages, HSBC’s Charles Morris, head of the company’s Absolute Return fund, said in a report.

Palladium for June delivery was down 0.3 percent at $762.85 an ounce. Platinum for July delivery was little changed at $1,775 an ounce.