Gold May Soar on Increased Demand
Investors opt for yellow metal amid Libyan unrest & inflation worries
Gold may gain in New York, narrowing the first weekly loss since January as demand for the metal as an alternative asset increases.
European equities slipped for a third day and commodities including crude oil and copper fell as an 8.9-magnitude earthquake in Japan, the world's strongest in more than a century, shook buildings across Tokyo and triggered a 33-feet-high tsunami. Muammar Qaddafi's son said Libyan government forces are mounting a fullscale attack on rebels.
Gold futures retreated 1.2% on Thursday, the most in a week.
"It is the demand for safety that is driving the buying of precious metals as geopolitical tensions in the Middle East and North Africa region escalate," Marc Ground, an analyst at Standard Bank Plc in Johannesburg, said in a report. Sovereign credit-rating downgrades have "seen market fears surrounding the euro zone debt crisis resurface" and the earthquake may also support gold, he said. Gold futures for April delivery rose $1.30, or 0.1%, to $1,413.80 an ounce at 8:05 am on the Comex in New York. Prices are down 1% this week, after reaching a record $1,445.70 on March 7. The metal for immediate delivery in London was 0.1% higher at $1,413.85. Gold declined to $1,409.75 an ounce in the morning "fixing" in London, used by some mining companies to sell output, from $1,413.25 at Thursday's afternoon fixing. Concern about rising inflation and currency debasement drove gold prices up 30% last year for a 10th annual gain. Chinese consumer prices rose at an annual 4.9% pace in February.
The pace of inflation was unchanged from January and compared with the 4.8% median forecast in a Bloomberg News survey of economists. Increasing food and commodity prices have contributed to unrest in North Africa and the Middle East that toppled leaders in Tunisia and Egypt. Saudi security forces on Thursday broke up a rally in the eastern city of al-Qatif before a "Day of Rage" protest, a local activist said.
European Union leaders meet are expected to meet to discuss tackling the region's debt crisis after Moody's Investors Service this week cut credit ratings for Spain and Greece.
"Given the mix of inflation concerns and the situation in the Middle East and North Africa and European Union debt, we expect dips will continue to be viewed as bargain hunting opportunities," James Moore, an analyst at TheBullionDesk.com in London, said in a report.
Ten of 16 traders, investors and analysts surveyed by Bloomberg, or 63%, said bullion will rise next week. Four predicted lower prices and two were neutral. Silver for May delivery in New York declined 1.4% to $34.57 an ounce. It climbed to $36.745 on March 7, the highest level since March 1980. That year futures reached a record $50.35.
Palladium for June delivery was down 1.2% at $757 an ounce after earlier on Friday falling to $742, the lowest level since January 7. Platinum for April delivery was 0.6% higher at $1,776.40 an ounce.
Gold Surges on Uncertainties
• The demand for safety is driving the buying of gold as geopolitical tensions in the Middle East region escalate
• Sovereign credit-rating downgrades have seen fears surrounding the euro zone debt crisis resurface
• Concern about rising inflation and currency debasement drove gold prices up 30% last year for a 10th annual gain
