Gold climbed to a record in New York and London after the Federal Reserve said it was willing to ease monetary policy further to boost the U.S. economy, triggering a slump in the dollar. The dollar declined as much as 1 percent against the euro today, after the Federal Open Market Committee said yesterday in its statement that it’s “prepared to provide additional accommodation if needed to support the economic recovery.” Silver reached the highest price since March 2008 and platinum hit a four-month high. “If and when this ‘additional accommodation’ discussed by the FOMC occurs, the reasoning will be more about a stealth devaluation of currency than a boost for consumer spending,” Brad Yim, a New York-based analyst at Castlestone Management Ltd., said by e-mail. The Fed wants a lower dollar to stimulate exports, he said. “A move like this should provide further support for gold in the near-to-medium term.” Gold for December delivery was 1.6 percent higher at $1,294.2 an ounce at 8:11 a.m. on the Comex in New York, after touching an all-time high $1,296.50. Bullion for immediate- delivery rose 0.4 percent to $1,292.60 an ounce in London, after earlier today rising to a record $1,295. The metal rose to an all-time high $1,291.75 an ounce in the morning “fixing” in London, used by some mining companies to sell output, from $1,275 at yesterday’s afternoon fixing. The dollar fell to the lowest against the euro in almost five months after Portugal sold 750 million euros ($1 billion) of bonds and investors bought the maximum amounts offered at Spanish and Irish debt sales yesterday. Gold and Inflation Gold, up 18 percent this year, is heading for its 10th consecutive annual gain, the longest winning streak since at least 1920. Bullion has outperformed global equities, Treasuries and most industrial metals, prompting record investments in gold-backed exchange-traded products. The metal rallied as central banks and governments maintained low borrowing costs and spent trillions of dollars to stimulate their economies. Global holdings of gold by ETPs gained 1.01 metric tons to a record 2,089.5 tons yesterday, according to Bloomberg data from 10 providers. Holdings are up 16 percent this year. Prices have gained this year even as U.S. inflation slowed. Bullion is traditionally bought as a hedge against rising consumer prices. Inflation expectations, based on the 10-year U.S. Treasury breakeven rate, have fallen to 1.82 percent from 2.19 percent six months ago. The FOMC said in a statement after its meeting yesterday in Washington that “inflation is likely to remain subdued for some time before rising to levels the committee considers consistent with its mandate.” Silver Surges “I don’t think many people are actively trading gold based on a view that inflation is likely to accelerate in the near- term,” said Tom Kendall, an analyst at Credit Suisse Group AG in London. “Certainly some people are concerned about the longer-term impact of current monetary policy on inflation.” This year gold is expected to average $1,203 an ounce, rising to an average of $1,347 next year, Mark Pervan, head of commodity research at Australia & New Zealand Banking Group Ltd. in Melbourne, said in a report today. Silver is expected to average $18.7 an ounce, climbing to $21.5 on average next year, according to the report. “A stronger gold and silver outlook reflects the rise in safe-haven demand,” Pervan wrote. Silver for December delivery in New York rose 2.2 percent to $21.09 an ounce. The metal reached $21.175 earlier today, the highest price since March 2008, and is up 24 percent this year. Platinum for October rose 1.2 percent to $1,630.9 an ounce, after gaining to $1,636.30, the highest level since May 19. Palladium for December gained 2.4 percent to $542.50 an ounce. To contact the reporter on this story: Anna Stablum in London at astablum@bloomberg.net To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net.

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