Gold Rises to 9-Month High on Inflation Concerns; Silver Gains

Gold surged to a nine-month high in New York after the U.S. said inflation accelerated more than forecast in January and commodity prices jumped.

The consumer-price index increased 0.2 percent last month, more than the 0.1 percent economists estimated, boosting the appeal of gold as a hedge. Crude oil jumped above $60 a barrel and corn reached a 10-year high, helping to send the Goldman Sachs Commodity Index to the highest level this year.

“Commodities are up across the board,” said Ron Goodis, director of Equidex Brokerage Group Inc. in Closter, New Jersey. “There’s still inflation. People want to own assets and they run for gold.”

Gold futures for April delivery rose $23, or 3.5 percent, to $684 an ounce on the Comex division of the New York Mercantile Exchange, after earlier reaching $686.40, the highest for a most-active contract since May 19. Gold has climbed 23 percent in the past year.

The Goldman Sachs index of 24 commodities rose 2.1 percent to 440.70, after reaching 441.76, the highest since Dec. 26.

Gold’s gain accelerated after the New York Mercantile Exchange said the number of open futures and options contracts was higher than some traders expected.

“Once the open-interest report came out, there was a big incentive to buy,” said Michael Guido, director of hedge-fund marketing at Societe Generale SA in New York. “There are no new shorts coming into the market.”

Open Interest

Some traders were concerned that gold’s decline yesterday of 1.8 percent, the biggest in six weeks, would spark renewed selling and may end this year’s rally. Instead, the number of open contracts fell by 3,476 contracts, or less than 0.9 percent, to 396,115, the Comex said.

“We’re seeing some bargain-hunting from bullish traders who think yesterday’s drop was a short-term phenomenon,” said Daniel Vaught, a commodity analyst at A.G. Edwards & Sons Inc. in St. Louis. “The market has shown a tendency to pivot around the $660 level.”

Gold rose earlier after the Commerce Department reported the 0.2 percent rise in consumer prices, after a 0.4 percent gain in December.

“There’s still underlying inflation expectations out there,” Vaught said.

Inflation Measure

Core inflation, excluding food and energy, climbed to 2.7 percent during the 12 months ended in January, the biggest rise since October, after a 2.6 percent rise for the period ended in December.

Some investors buy gold when consumer prices climb to hedge against inflation. Gold futures reached a record $873 an ounce in January 1980 when the inflation rate surged to 13.9 percent. Gold climbed 23 percent last year as consumer prices gained 2.5 percent.

Silver also gained. Silver for March delivery rose 44.3 cents, or 3.2 percent, to $14.273 an ounce on the Comex. Silver has climbed 10 percent this year while gold has gained 7 percent.

A futures contract is an obligation to buy or sell a commodity at a set price for delivery by a specific date.

Source: quote.bloomberg.com