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Gold rises to record on investor demand for currency alternative

Gold climbed to a record in New York and London for a second day as a weaker dollar spurred demand for an alternative investment. Silver futures extended a rally to a 30-year high and palladium reached a 9-year high in London.

The dollar slid to the lowest level since January against the euro and fell to a 15-year low versus the yen before reports likely to fuel speculation the Federal Reserve will ease policy further.

Gold futures, which usually move inversely to the greenback, traded within 1pc of $1,400 an ounce.

“There is a distrust of currencies and gold is the only solution,” said Bernard Sin, head of currency and metal trading at bullion refiner MKS Finance SA in Geneva.

“A lot of money is going into precious metals” and there’s demand from India because of the country’s festival season, he said.

Gold futures for December delivery added as much as $17.60, or 1.3pc, to $1,388.10 an ounce and traded at $1,380.50 at 8:01am on the Comex in New York.

Bullion for immediate delivery in London was 0.6pc higher at $1,379.75 an ounce after reaching $1,387.35.

Bullion rose to a record $1,380.75 an ounce in the morning “fixing” in London, used by some mining companies to sell output, from $1,365.50 at yesterday’s afternoon fixing.

Gold, up 26pc this year, is heading for its 10th consecutive annual gain, the longest winning streak since at least 1920 in London.

Bullion has outperformed global equities, Treasuries and most industrial metals, prompting record investment 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 economies.

Asset purchases

Fed Chairman Ben Bernanke will speak tomorrow on monetary policy objectives and tools in Boston.

He said on October 4 that the central bank’s first round of large-scale asset purchases aided the economy and that further quantitative easing is likely to help more.

“Markets continued to price-in a second round of US quantitative easing, which is expected to pressure the US dollar and support gold as a currency hedge,” Mark Pervan, a senior commodity strategist at Australia and New Zealand Banking Group Ltd, wrote in a report today.

UBS AG today raised its one-month gold forecast to $1,425, from a previous estimate of $1,300, and increased its three- month outlook to $1,400, from $1,300.

A gain to $1,500 before the end of the year is “feasible” if the Fed announces more bond purchases, the bank said.

‘Very nervous’

“A wide variety of gold investors remain very nervous about missing the move, and their scramble to get involved is moving the metal further,” London-based UBS analyst Edel Tully said in a report.

“Those who want gold and either don’t have it or don’t have enough of it are now chasing the market. This raises the risk that gold’s gains accelerate even further in the short term.”

In India, the world’s biggest gold buyer, futures for December delivery reached a record 20,028 rupees per 10 grams on the Multi Commodity Exchange of India Ltd.

Gold traded in Canadian dollars climbed to the highest price since at least 1971, while bullion in yen and Swiss francs rose to the highest price in more than three months, data compiled by Bloomberg show.

Gold assets in exchange-traded products are up 16pc this year and reached a record 2,097.01 metric tons on September 30, according to data compiled by Bloomberg from 10 providers. Holdings declined 1.39 tons to 2,084.88 tons yesterday.

Silver surges

Silver climbed 46pc this year, outperforming gold and almost matching palladium’s advance.

Silver held through four providers of ETPs gained 3.98 tons to 14,108.76 tons yesterday, the highest level since at least February, data compiled by Bloomberg show.

Silver for December delivery in New York advanced as much as 4.3pc to $24.95 an ounce, the highest price since March 1980, and was last at $24.565.

The metal reached an all-time high of $50.35 in New York in 1980, a year after the Hunt brothers tried to corner the market.

The ratio of gold to silver fell to the lowest since before the collapse of Lehman Brothers in 2008. One ounce of gold bought as little as 55.6898 ounces of silver today in London, the least since August 2008.

“Silver is still considered cheap, even at these levels,” MKS Finance’s Sin said. The metal “was really undervalued and has attracted a lot of interest.”

Platinum for January delivery rose as much as 1.2pc to $1,727.60 an ounce, and was last at $1,720. Palladium for December delivery climbed as much as 1.pc to $605 an ounce, and last traded at $599.

Prices reached $606.25 on October 7, the highest since 2001. Spot palladium reached $605.13 in London today, the highest level since June 2001.

Holdings of the metal through three providers of ETPs climbed 2.5 tons to 58.49 tons yesterday, the highest level in at least eight months, data compiled by Bloomberg show.