Gold Trades Near Record on Europe Debt Risk: Silver Reaches 31-Year Peak

Posted:  Mar 24, 2011
By Nicholas Larking

Gold rose for the seventh straight session, nearing a record, as fighting in Libya and Europe’s debt crisis spurred demand for an alternative investment. Silver climbed to a 31-year high.

U.S. and allied warplanes carried out further strikes against Muammar Qaddafi’s ground troops as Libyan government forces increased their attacks on cities. Portuguese Prime Minister Jose Socrates tendered his resignation, pushing the country closer to an international bailout. Engineers at Japan’s damaged Fukushima Dai-Ichi nuclear plant were evacuated from one reactor after three men suffered radiation burns.

“Gold and silver are justifying their reputation as safe havens,” Carsten Fritsch, an analyst at Commerzbank AG (CBK) in Frankfurt, said in a report. “In addition to the war in Libya, the unrest in the Arab region and the disaster in Japan, the debt crisis in euro-zone periphery countries has also returned with a vengeance. Gold and silver are likely to profit further.”

Gold futures for April delivery rose $2.70, or 0.2 percent, to $1,440.70 an ounce at 10:07 a.m. on the Comex in New York. Earlier, the price touched $1,442.70, nearing the record of $1,445.70 reached on March 7.

The precious metal will rise to $5,000 in the next three to four years as governments across the globe fuel money supply and raise the prospect of currency debasement, Robert McEwen, the chief executive officer of miner U.S. Gold Corp., told Bloomberg Television.

Financial Uncertainty

Gold is in for a “big cycle,” McEwen said. Portugal’s debt problems and a possible bailout by the European Union “means more uncertainties for financial markets and is positive for gold prices,” he said.

Gold rallied 30 percent in 2010, the 10th straight annual gain, as governments kept interest rates low to spur growth.

Gold rose even as the dollar strengthened, a signal of the metal’s bullishness, said Dennis Gartman, an economist and editor of the Suffolk, Virginia-based Gartman Letter.

“Gold is strong,” Gartman said. “When gold rises as the dollar strengthens, our interest is obviously piqued.”

Silver futures for May delivery rose 54.7 cents, or 1.5 percent, to $37.745 an ounce, after touching $37.925, the highest since February 1980. The metal that year reached a record $50.35.

Silver’s gain is due to “continuing strong industrial and investment demand and tight supply,” analysts at GoldCore Ltd. in Dublin said in an e-mail. “Many investors are seeing silver as a cheaper safe-haven substitute than gold. Silver looks set to target $40 an ounce, and in the longer term, many investors see the record highs as a very viable price target.”

Palladium futures for June delivery rose $7.90, or 1.1 percent, to $757.20 an ounce on the New York Mercantile Exchange. Platinum futures for July delivery rose $1.60, or 0.1 percent, to $1,765.80 an ounce on the Nymex.

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