Gold Futures Rise as Inflation Concerns Mount; Silver Tops $30

by Pham-Duy Nguyen - Feb 9, 2011 3:19 AM GMT+0800
Source: Bloomberg

Gold futures climbed to a two-week high on demand for a hedge against rising consumer prices, after China increased borrowing costs to slow inflation. Silver advanced to a one-month high, topping $30 an ounce.

China joined India, Indonesia, Thailand and South Korea in boosting interest rates this year as Asian policy makers seek to cool the economies leading a global rebound. A report in China is forecast to show inflation in the country expanded at the fastest pace in 30 months. World food prices rose to a record in January and probably will remain elevated, the United Nations said last week.

“People are buying gold as an inflation hedge,” said Matthew Zeman, a trader at LaSalle Futures Group in Chicago. “A more hawkish tone on the part of central banks is going to have people concerned about inflation.”

Gold futures for April delivery rose $15.90, or 1.2 percent, to settle at $1,364.10 an ounce at 1:15 p.m. on the Comex in New York. Earlier, the price reached $1,368.70, the highest since Jan. 20.

JPMorgan Chase & Co., the second-biggest U.S. bank by assets, said it would accept the metal as collateral for trading.

The bank “is saying gold is safe enough to use as a store of value,” said Adam Klopfenstein, a senior strategist at Lind- Waldock, a broker in Chicago. “They feel that gold is a stable asset class, and this is going to support a new wave of investors.”

Last year, gold rose 30 percent, the 10th straight annual gain, partly because escalating sovereign debt in Europe increased the chances of defaults on government bonds.

Gold also may attract technical buyers after rallying above its 20-day moving average, near $1,352, Zeman said.

Silver Rally

Silver futures for March delivery gained 92.8 cents, or 3.2 percent, to settle at $30.271 an ounce on the Comex. Earlier, the price reached $30.285, the highest since Jan. 4.

Silver, which has wider industrial applications than gold, rose 84 percent last year and touched a 30-year high of $31.275 on Jan. 3, before dropping as low as $26.30 on Jan. 28.

“Ever a fickle mistress, silver bestows its favors alternately between gold and the industrial sector, reflecting its hybrid fundamentals,” analysts at Societe Generale said yesterday in a report. Copper reached a record yesterday.

Palladium futures for March delivery advanced $19.40, or 2.4 percent, to $838.45 an ounce on the New York Mercantile Exchange. Platinum futures for April delivery rose $17.70, or 1 percent, to $1,861.90 an ounce.

To contact the reporter on this story: Pham-Duy Nguyen in Seattle at
To contact the editor responsible for this story: Steve Stroth at
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