Gold to Rise in New York on Egypt, Inflation

By Nicholas Larkin and Sungwoo Park
Bloomberg
February 2, 2011

Gold may climb in New York and rebound from the first monthly drop since July on speculation rising inflation and protests in Egypt will spur demand for the metal.

Egypt’s President Hosni Mubarak offered to negotiate with an opposition movement that plans to force him out of office by bringing a million people onto the streets today. Crude oil yesterday climbed to a two-year high. European inflation quickened to 2.4 percent in January, data released yesterday showed, accelerating more than economists forecast.

There are “bullish issues such as the lack of a cohesive government in Egypt and likely forthcoming inflation signaled by higher oil prices,” Tom Pawlicki, an analyst at MF Global Holdings Ltd. in Chicago, said today in a report.

Gold futures for April delivery added $3.90, or 0.3 percent, to $1,338.40 an ounce at 7:54 a.m. on the Comex in New York. The price slumped 6.1 percent in January, the biggest monthly drop since December 2009. The metal for immediate delivery in London was 0.4 percent higher at $1,337.57.

Bullion rose to $1,337.50 an ounce in the morning “fixing” in London, used by some mining companies to sell output, from $1,327 at yesterday’s afternoon fixing.

Protesters in Egypt have defied curfews for the past week to demand an end to the president’s 30-year rule. That’s left more than 100 people dead and roiled international stock, bond and oil markets, with investors concerned the unrest may spread to other countries in the region or lead to the closing of the Suez Canal.

Inflation Hedge

Oil rose 7.7 percent in the two days through yesterday in New York. South Korea’s inflation accelerated to 4.1 percent in January, breaching the central bank’s 4 percent ceiling, according to data from Statistics Korea today. Consumer prices in Indonesia, Southeast Asia’s biggest economy, rose 7.02 percent last month, after a 6.96 percent gain in December, Central Bureau of Statistics data showed today.

“We are seeing inflation on the rise globally,” said Darren Heathcote, the head of trading at Investec Bank (Australia) Ltd. in Sydney, by phone. “Gold has always been seen as an asset to protect against inflation. So, when we start talking about potential inflation, we do find quite often there’ll be some buying as a result.”

Gold held through exchange-traded products fell for a sixth day, declining 2.61 metric tons to 2,031.21 tons yesterday, data compiled by Bloomberg from 10 providers show. That’s the lowest level since June 9. Holdings reached a record 2,114.6 tons in December.

Silver for March delivery in New York added 0.3 percent to $28.245 an ounce. The metal slipped 8.9 percent in January, the first monthly drop since July.

Palladium for March delivery gained 0.3 percent to $822.35 an ounce, after January’s 2.1 percent gain, a seventh straight monthly increase. Platinum for April delivery was 0.7 percent higher at $1,813.20 an ounce. It added 1.3 percent last month.