Gold rose above $1,500 an ounce to a record in New York and London as a weaker dollar and concern about debt and faster inflation spurred demand for an alternative investment. Silver reached a 31-year high.
The dollar slipped as much as 1 percent against six major currencies, trading at a 16-month low, while a U.S. gauge of trader inflation expectations approached the highest level since 2008. Gold, which typically moves inversely to the greenback, has climbed this year as unrest in the Middle East and North Africa and Europe's debt crisis boosted demand.
"The dollar has lost ground to its major counterparts," James Moore, an analyst at TheBullionDesk.com in London, said in a report to clients. "The mix of inflation, currency debasement, euro zone debt and Middle East and North African unrest continues to fuel investment demand."
Gold futures for June delivery gained as much as $11.10, or 0.7 percent, to $1,506.20 an ounce and were at $1,501.20 by 8 a.m. on the Comex in New York. The metal for immediate delivery in London was 0.3 percent higher at $1,501.18 an ounce after reaching a record $1,505.65.
The difference between yields on U.S. 10-year notes and Treasury Inflation Protected Securities, a gauge of trader expectations for inflation, today widened to as much as 2.66 percentage points. The spread reached 2.67 percentage points on April 11, the most in three years. Standard & Poor's lowered its U.S. credit-rating outlook on April 18, citing the widening budget deficit.
'Best Returns Around'
European Central Bank policy makers are balancing the need for higher borrowing costs in countries like Germany, where the economy is booming, against soaring bond yields in the region's heavily indebted nations. Some ECB governing council members have signaled they will back more increases in borrowing costs after the central bank lifted its benchmark rate by 25 basis points from a record low on April 7.
"With interest rates remaining low in most countries, there is little reason not to own gold, as the metal currently offers the best returns around," said Gavin Wendt, founding director with MineLife Pty. Coupled with the debt turmoil in Europe and violence in the Middle East, "it's a perfect storm for precious metals, including gold and silver."
Freeport-McMoRan Copper & Gold Inc.'s Indonesian unit halted underground activities at the country's Grasberg mine after an accident killed one worker and left another missing, a spokesman said yesterday. Grasberg contains the biggest single gold reserve, according to the company's website.
Silver for May delivery in New York climbed as much as 2 percent to $44.80 an ounce, the highest price since January 1980, the year futures reached a record $50.35. The metal was last up 1.7 percent at $44.67 and has surged 44 percent in 2011. An ounce of gold bought as little as 33.59 ounces of silver in London today, the least since August 1983, data compiled by Bloomberg show.
Palladium for June delivery was up 3.2 percent at $754.75 an ounce. Platinum for July delivery gained 1.3 percent to $1,793.60 an ounce.
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