BLBG: Gold Advances on Inflation Concern; Heads for Weekly Increase
Gold rose in London, heading for a weekly gain, on speculation central-bank measures to revive economies will spur inflation and demand for bullion as a hedge.
The European Central Bank yesterday cut benchmark interest rates to a record 1 percent and unveiled plans to buy 60 billion euros ($81 billion) in covered bonds, while the Bank of England said it would increase purchases of debt.
“Credit markets will be unblocked at some point and this will push up inflation,” Walter de Wet, a London-based analyst at Standard Bank Ltd., said by phone today. ECB and BOE action is “bullish for gold” and “pushes more liquidity into the financial system.”
Gold for immediate delivery rose $3.25, or 0.4 percent, to $913.95 an ounce by 9:54 a.m. in London, set for a 3.1 percent gain this week. June futures fell $1 to $914.50 in electronic trading on the New York Mercantile Exchange’s Comex division.
Gains in the metal are being curbed on anticipation the worst of the crisis in the world banking system may have past.
The Federal Reserve determined 10 banks need to raise a total of $74.6 billion in capital, a finding that Chairman Ben S. Bernanke said should reassure investors about the soundness of the financial system. A government report later today will probably show U.S. employers cut fewer jobs in April as signs emerged that the worst of the U.S. recession had passed, according to a Bloomberg survey of economists.
“The much dreaded U.S. bank stress tests turned out to be a ‘no mover’ and if today’s non-farm payrolls too come in line with market expectations, gold could suffer a setback,” Pradeep Unni, an analyst at Richcomm Global Services DMCC in Dubai, wrote in a research report today.
Investment Funds
Investment in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, was unchanged at 1,104.09 metric tons yesterday. The fund last attracted new flows on April 9.
Among other metals for immediate delivery in London, silver rose 0.4 percent to $13.91 an ounce. Platinum gained 0.3 percent to $1,152, and palladium jumped 1.2 percent to $241.75 an ounce.
Sales of autos, which use platinum and palladium to reduce exhaust fumes, in China rose to a record in April, the China Association of Automobile Manufacturers said today.
“The numbers were better than expected,” Afshin Nabavi, a senior vice president at MKS Finance SA, said by phone in Geneva today. “That’s impressing the platinum and palladium market.”
