Oct. 25 (Bloomberg) -- Gold futures rose to the highest price in more than a month, topping $1,700 an ounce, as delays in resolving Europe’s debt crisis and renewed inflation concern in the U.S. spurred demand for the precious metal.
A meeting of European Union finance ministers was canceled because bank-recapitalization issues cannot be decided before other elements of the rescue package, a person familiar with the matter said on condition of anonymity. Federal Reserve Vice Chairman Janet Yellen said on Oct. 21 that a third round of large-scale securities purchases may become warranted to boost the economy. Gold and silver posted the biggest gains today on the Standard & Poor’s GSCI index of 24 commodities.
“Gold is getting support because there is a general consensus that there will be Fed-induced stimulus to support growth in U.S. at a time when Europe may go into recession because of the debt crisis,” Paul Dietrich, the chief executive officer of Foxhall Capital Management Inc., said in a telephone interview from Alexandria, Virginia. “And that may be inflationary.”
Gold is in the 11th year of a bull market that sent prices to a record $1,923.70 on Sept. 6 as investors sought to diversify away from equities and some currencies. The precious metal has doubled since the end of 2008 as governments struggled with sovereign debt and an economic slowdown. In London, the bullion rally is the longest since at least 1920.
Gold futures for December delivery gained 2.9 percent to settle at $1,700.40 at 1:40 p.m. on the Comex in New York, after touching $1,704.70, the highest for a most-active contract since Sept. 23. Prices are up 20 percent this year.
A meeting of European Union finance ministers scheduled for tomorrow was canceled today while other leaders of the region prepared to meet tomorrow in Brussels for the second summit in four days in a bid to carve out a solution to the region’s debt crisis. They are seeking an agreement on bolstering the region’s rescue fund, recapitalizing banks and providing debt relief to Greece to avoid contagion spreading to Italy and Spain.
“We saw some increased buying after the confusion about tomorrow’s meetings,” Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago, said in a telephone interview. “Also, the strength in the commodities pack is helping gold.”
The S&P GSCI rallied as much as 1.4 percent, reaching a five-week high. Silver futures for December delivery surged 4.4 percent to close at $33.052 an ounce on the Comex, the biggest gain since Oct. 6. Crude oil advanced 2.1 percent to $93.17 a barrel on the New York Mercantile Exchange, reaching a 12-week high on signs of declining stockpiles in the U.S.
“Nobody really wants to go short on gold,” Bernard Sin, the head of currency and metal trading at bullion refiner MKS Finance SA in Geneva, said today by telephone. “I don’t think Europe will be out of the woods yet.”
The Diwali religious festival this week in India, the world’s biggest gold buyer, also may spur physical demand, Sin said.
On the New York Mercantile Exchange, platinum futures for January delivery advanced 1.7 percent to $1,568.80 an ounce, rising for the third straight session. Palladium futures for December delivery advanced 2.1 percent to $652.10 an ounce.
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