Bloomberg News

Gold Rises as Energy Costs Boost Demand for Inflation Hedge

June 09, 2011

June 9 (Bloomberg) -- Gold rose for the first time in three days on speculation that higher energy costs will boost demand for the precious metal as a hedge against inflation. Palladium futures jumped to a three-month high.

Crude oil topped $102 a barrel in New York after the Organization of Petroleum Exporting Countries failed to reach an agreement on production targets. Federal Reserve Chairman Ben S. Bernanke signaled this week that there won’t be a third round of so-called quantitative easing and U.S. interest rates will remain low.

“Crude oil is hugging the $100 level and won’t let go,” said Matt Zeman, a strategist at Kingsview Financial in Chicago. “People are choosing to focus on inflationary fears because the Fed will have to maintain low rates into next year.”

Gold futures for August delivery rose $4, or 0.3 percent, to settle at $1,542.70 an ounce at 1:43 p.m. on the Comex in New York. The metal has gained 25 percent in the past year, reaching a record $1,577.40 on May 2.

“Crude oil is a barometer for the camp that wants to buy gold as an inflation hedge,” said Adam Klopfenstein, a senior market strategist at Lind-Waldock in Chicago.

The Fed will end its second round of quantitative easing by buying back $600 billion in Treasuries by the end of the month. The central bank has kept its benchmark interest rate at zero percent to 0.25 percent since December 2008.

Silver futures for July delivery rose 80.4 cents, or 2.2 percent, to $37.424 an ounce, the biggest gain since May 25. The price has doubled in the past 12 months.

Palladium futures for September delivery climbed $12.40, or 1.5 percent, to $818.10 an ounce on the New York Mercantile Exchange. Earlier, the price reached $819.75, the highest for a most-active contract since March 7.

Platinum futures for July delivery gained $13.50, or 0.7 percent, to $1,844.70 an ounce. Earlier, the metal reached $1,849.30, the highest since May 4.

--Editors: Patrick McKiernan, Steve Stroth

To contact the reporter on this story: Pham-Duy Nguyen in Seattle at pnguyen@bloomberg.net.

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net.


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