BLBG: Gold May Rise as Investors Hedge Against Potential Inflation
Gold, little changed in London, may rise as governments and central banks cut interest rates and attempt to revive the global economy, boosting the metal’s appeal as a hedge against future inflation.
The Bank of England will cut interest rates by 50 basis points tomorrow to 1 percent, while the European Central Bank will keep its rate at 2 percent, according to Bloomberg surveys of economists. The U.S. Senate is weighing an estimated $885 billion economic stimulus plan backed by President Barack Obama.
“All these incentives create more inflationary pressures and will eventually support gold prices,” Andrey Kryuchenkov, an analyst with VTB Capital in London, wrote in a note.
Bullion for immediate delivery added $2.10, or 0.2 percent, to $902.45 an ounce at 10 a.m. in London. April futures rose $10.90, or 1.2 percent, to $903.40 in electronic trading on the Comex division of the New York Mercantile Exchange.
UBS AG expects gold to average $1,000 an ounce this year, up 43 percent from its previous forecast, as investment demand will likely double in 2009 compared with 2007.
“The current financial sector turmoil, having triggered renewed interest in gold as a safe haven, is likely to keep investors looking at gold in the near future,” UBS analyst John Reade wrote in a report today.
Among other metals for immediate delivery in London, silver lost 0.1 percent to $12.43 an ounce. Platinum gained $2.50, or 0.3 percent, to $965 an ounce, and palladium was 1 percent lower at $193.75 an ounce.
