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Gold Jumps to 10-Month High on U.S. Stimulus Speculation

Gold futures jumped to a 10-month high after Federal Reserve Bank of Chicago President Charles Evans said that the U.S. central bank can do more to boost the economy, fueling concern that inflation will accelerate.

Evans, who doesn’t vote on Fed policy this year, said today in an interview on CNBC that unemployment probably won’t fall to 7 percent until 2014. The central bank can “back off” of its accommodation should inflation present a greater threat, he said. In the third quarter, gold gained 11 percent, the most since June 2010, as the Fed announced a third round of monetary stimulus.

Demand for gold as a store of value surged amid speculation that inflation will pick up after the Fed, the Bank of Japan and the European Central Bank announced plans to buy more debt. Holdings in exchange-traded products backed by the metal jumped to a record on Sept. 25, while money managers and hedge funds raised their bullish futures bets for the sixth straight week to the highest since February, U.S. data showed on Sept. 28.

“People are hurrying up and buying gold as today’s comments tell us that the Fed will continue with the stimulus policies until its sees some improvement in economic conditions,” Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago, said in a telephone interview. “The inflation worries are back.”

Gold futures for December delivery rose 0.5 percent to settle at $1,783.30 an ounce at 1:35 p.m. on the Comex in New York. Earlier, the price reached $1,794.40, the highest for a most-active contract since Nov. 14.

Annual Gains

The precious metal has climbed 14 percent this year. Gold started a run of consecutive annual gains in 2001. Futures reached a record $1,923.70 on Sept. 6, 2011, as Europe’s fiscal woes escalated.

The metal soared 70 percent from the end of December 2008 to June 2011 as the Fed kept borrowing costs at a record low and bought $2.3 trillion of bonds in two rounds of so-called quantitative easing. On Sept. 13, the central bank said it will expand holdings of long-term securities with open-ended purchases of $40 billion of mortgage debt a month and keep the benchmark interest rate near zero percent “at least through mid-2015.”

Holdings in gold ETPs more than doubled since the end of 2008 to 2,545.35 metric tons of as Sept. 28, data tracked by Bloomberg show.

Bullish Bets

In the week ended Sept. 25, hedge funds increased bullish bets on Comex gold by 6.4 percent to 189,870 futures and options contracts, the highest since February, government data showed.

Silver futures for December delivery climbed 1.1 percent to $34.952 an ounce on the Comex after advancing to $35.445, the highest since March 2.

Platinum futures for January delivery jumped 1 percent to $1,685.80 an ounce on the New York Mercantile Exchange, the fifth-straight increase.

Palladium futures for December delivery gained 0.7 percent to $645.60 an ounce on the Nymex.

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