Gold Rises to Record on Increased Demand for Wealth Protection

Nicholas Larkin, On Thursday September 16, 2010, 7:34 am EDT

Gold rose to a record in London and New York as investors sought protection against turmoil in the global economy and financial markets. Silver rose to the highest price since March 2008.

Bullion climbed as high as $1,277.07 an ounce in London. The dollar fell to a five-week low against the euro today. The metal usually moves inversely to the U.S. currency. Global holdings of gold by exchange-traded products are up 16 percent this year and this month reached a record, Bloomberg data show.

“People are worried about the European financial system and debt market, and the outlook for the U.S. and global economy,” said Mark O’Byrne, executive director of brokerage GoldCore Ltd. in Dublin. “People are worried about equities, debt, property” and currencies, he said.

Gold, up 16 percent this year, is heading for its 10th consecutive annual gain, the longest winning streak since at least 1920. Bullion has outperformed global equities, Treasuries and most industrial metals, prompting record investments in gold-backed ETPs. The metal reached all-time highs in euros, sterling and Swiss francs in June.

Immediate-delivery bullion added $8.15, or 0.6 percent, to $1,276.20 an ounce at 12:14 p.m. in London. It surpassed the previous all-time high of $1,274.95 set Sept. 14. The metal for December delivery was 0.6 percent higher at $1,276.50 on the Comex in New York after earlier reaching an all-time high $1,278.60.

Bullion has gained as the MSCI World Index of equities fell 0.9 percent this year. Copper added 3.9 percent and crude oil is down 5 percent.

Yen-Dollar

The yen advanced against the dollar today, paring losses from yesterday when Japan’s government intervened for the first time since 2004 to curb gains that threaten an export-led recovery. The greenback slipped as much as 0.8 percent against the euro today. A U.S. report today on jobless claims may add to evidence that growth in the world’s largest economy is slowing, according to a Bloomberg survey of economists.

“The dollar has been weakening and that’s been helping gold,” said Eugen Weinberg, head of commodity research at Commerzbank AG. “Investors are looking for a safe haven.”

Bullion, traditionally a hedge against rising consumer prices, gained this year even as U.S. inflation slowed. Inflation expectations, based on the 10-year U.S. Treasury breakeven rate, have fallen to 1.78 percent from 2.25 percent six months ago.

Silver Climbs

Silver for immediate delivery in London added as much as 0.9 percent to $20.7612 an ounce, the highest price since March 2008. The metal was last at $20.7125, taking its yearly gain to 23 percent.

Global holdings of silver by ETPs gained 45.8 metric tons to 13,211.9 tons yesterday, according to Bloomberg data from four providers. That’s the highest in at least seven months.

Platinum was little changed at $1,609.15 an ounce after yesterday reaching $1,612.75, the highest level since May 20. Palladium fell 0.2 percent to $556 an ounce. The metal yesterday reached $563.25, the highest price since April 27.

To contact the reporter on this story: Nicholas Larkin in London at [e-mail].

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