Bloomberg News

Gold May Gain in New York on Inflation Concern, Debt Woes

June 14, 2011

June 14 (Bloomberg) -- Gold may gain for the first time in three days in New York as concern about rising inflation and Europe’s debt crisis spur demand for the metal as a protection of wealth.

China ordered lenders to set aside more cash as reserves after inflation accelerated to the fastest pace in almost three years, while consumer price increases in India quickened. Standard & Poor’s yesterday branded Greece with the world’s lowest credit rating, saying the nation is “increasingly likely” to face a debt restructuring.

“The inflation story is still in the back of people’s minds,” said Bernard Sin, the head of currency and metal trading at MKS Finance SA, a bullion refiner in Geneva. “Europe is definitely a problem, that’s why you’re seeing decent demand. Physical traders might be happy to get in at these levels.”

Gold for August delivery rose $3.40, or 0.2 percent, to $1,519 an ounce by 8 a.m. on the Comex in New York. Immediate- delivery gold was 0.2 percent higher at $1,518.40 in London.

Bullion fell to $1,519 an ounce in the morning “fixing” in London, used by some mining companies to sell output, from $1,526.25 at yesterday’s afternoon fixing.

Gold is up 6.9 percent in 2011 after climbing the past 10 years, the longest run of gains in at least nine decades in London. Europe’s debt crisis helped bullion futures reach a record $1,577.40 on May 2. European Union finance ministers meeting today are trying to resolve the debt crisis in Greece.

China Rates

An agreement is critical to Greece’s solvency as the International Monetary Fund can’t pay its share of a 12 billion- euro ($17.3 billion) bailout in July unless a plan is in place to plug the nation’s 2012 financing gap of about 30 billion euros.

China has boosted interest rates four times since September and increased banks’ reserve requirements to a record to curb higher consumer costs. Inflation has exceeded the government’s 4 percent target each month this year. Low-income nations from India to Algeria are struggling with food prices that climbed to a record in February, according to a United Nations gauge.

“Gold is the main beneficiary of rising inflation,” Park Jong Beom, a Seoul-based senior trader with Tongyang Futures Co., said before the Chinese data was released. “Still, the metal’s upward momentum isn’t strong enough to push through the $1,550 level again, which suggests gold may face another round of correction.”

Silver for July delivery was little changed at $34.715 an ounce in New York. Palladium for September delivery declined 0.5 percent to $796.50 an ounce. Platinum for July delivery was down 0.4 percent at $1,798.90 an ounce.

--With assistance from Sungwoo Park in Seoul. Editors: John Deane, Sharon Lindores

To contact the reporters on this story: Kyoungwha Kim in Singapore at kkim19@bloomberg.net; Nicholas Larkin in London at nlarkin1@bloomberg.net;

To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net


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