Gold, Silver Rise to Highest Since Early 1980s; Palladium Jumps
March 30 (Bloomberg) -- Gold and silver prices surged, trading at the highest since the early 1980s, as investment funds bet precious metals will outperform U.S. stocks and bonds. Platinum and palladium also gained.
Gold has gained 14 percent this year, and silver has soared 31 percent, outpacing a 4.2 percent increase in the Standard & Poor's 500 Index. Investment in the StreetTracks Gold fund linked to the price of the precious metal has jumped by about a third this year to 11.2 million ounces. A similar fund for silver is under review by regulators.
``Precious metals are booming,'' said Herwig Schmidt, a trader at Triland Metals Ltd. in London. ``If you have a huge amount of money and limited commodities, this is what happens.''
The Philadelphia Stock Exchange Gold and Silver Index of 16 companies climbed to seven-week high, including record highs for Toronto-based producer Agnico-Eagle Mines Ltd. and Glamis Gold Ltd. of Denver. Newmont Mining Corp., the world's largest gold producer, was up 2.5 percent after surging more than 5 percent.
Gold futures for June delivery rose $13.20, or 2.3 percent, to $591.80 an ounce on the Comex division of the New York Mercantile Exchange, the highest closing price for the most- active contract since January 1981. Silver for May delivery rose 54.5 cents, or 4.9 percent, to $11.66. Prices are at the highest since September 1983.
A futures contract is an obligation to buy or sell a commodity at a set price for delivery by a specific date.
Palladium, Platinum
Palladium futures for June delivery climbed $12.90, or 3.8 percent, to $350.30 an ounce. Platinum for July delivery rose $14.80, or 1.4 percent, to $1,102.70 an ounce. Earlier prices reached $1,104.80, a record.
Investment demand for gold is expected to reach 45.2 million ounces this year, according to CPM Group, a New York- based research company. Demand reached 46.7 million ounces in 2005, the third-highest ever. Investors bought a record 50.2 million ounces in 2003 and 46.8 million ounces in 1967.
Demand for silver and gold may rise as exchange-traded funds make it easier for investors to own bullion, analysts said. Silver has gained 20 percent this month in anticipation of approval for the first fund for the precious metal. Barclays Plc's proposed fund, which is to be listed on the American Stock Exchange, awaits regulatory approval.
``Exchange-traded funds provide easy access to hedging against the weaker dollar,'' said Friedrich Kernstock, an analyst at Kernco Metal Trading GmbH in Vienna. Gold may reach $600 in three months and $650 by the end of the year, he said.
Weaker Dollar
Investors are snapping up bullion on speculation the U.S. may allow the dollar to weaken. The dollar fell against the euro and yen on concern investors may dump U.S. assets if the Bush administration pursues a policy supporting a weaker currency to help spur economic growth and employment. Gold is sold in dollars and gained in all currencies last year, paced by a 36 percent gain in gold sold in yen and euros.
The New York Times reported today that Joshua Bolten, who will replace Andrew Card as White House chief of staff next month, wants Treasury Secretary John Snow to resign. Snow has been an advocate of a ``strong dollar'' policy.
``The potential for a weakening dollar is definitely a driver for gold,'' Evan Smith, portfolio manager at U.S. Global Investors, said in Singapore. ``We could see $700 an ounce in two years.''
Inflation
Investors are also buying gold to hedge against inflation, analysts said. The U.S. government today said an inflation measure watched by the Fed Reserve rose more than earlier reported. The GDP price index rose at an annual rate of 3.5 percent in the fourth quarter, compared with the 3.3 percent estimated last month and a 3.3 percent third-quarter gain, the Commerce Department said.
``Gold is telling us that not everyone is convinced inflation is in check,'' said Ralph Preston of Heritage West Futures in San Diego.
Silver's rise this month also helped lift gold over a previous resistance point of $579.50, reached on Feb. 2, analysts said. The technical breakout has renewed investment interest.
``You have a new inflow of momentum traders,'' said Michael Guido, director of hedge fund marketing and commodity strategy for Societe Generale SA in New York. ``There's a vested interest for this market to close high at the end of this month and this quarter.''
Gold may trade lower next week as some investors take a profit from this week's gains, said John Person, an analyst at NationalFutures.com in Palm Beach, Florida.
``We should start to see those who are long take money off the table,'' Person said.
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