Gold Rises as Investors Seek Store of Value; Silver Advances

Feb. 5 (Bloomberg) -- Gold rose the most this week on speculation the global recession will boost demand for precious metals as a store of value. Silver also gained.

Goldman Sachs Group Inc. said yesterday gold will rise to $1,000 an ounce within three months, up 43 percent from the bank’s previous forecast. Investment in the SPDR Gold Trust, the biggest exchange-traded fund backed by bullion, rose to a record 859.5 metric tons yesterday. Gold has rallied 34 percent after touching a 13-month low on Oct. 24.

“Gold is telling you that all paper assets are suspect,” said Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago. “As the recession deepens, there’s significant flows into gold as an asset class or a currency that cannot vanish overnight.”

Gold futures for April delivery rose $12, or 1.3 percent, to $914.20 an ounce on the Comex division of the New York Mercantile Exchange, the biggest gain since Jan. 30. The metal climbed 1.1 percent yesterday.

Silver futures for March delivery rose 28 cents, or 2.2 percent, to $12.75 an ounce. The metal has climbed 13 percent this year, while gold is up 3.4.

The SPDR Gold Trust is the seventh-largest holder of bullion behind central banks and the International Monetary Fund, according to data from the World Gold Council. The U.S. Federal Reserve is the largest holder.

Equities Slump

Assets in the SPDR Gold Trust rose 8.1 percent in January as the price of gold gained 5 percent. The Standard & Poor’s 500 Index lost 8.6 percent last month, while the Reuters/Jefferies CRB Index of 19 raw materials declined 4 percent.

Governments worldwide are lowering interest rates and spending trillions of dollars to revive their economies, which will lead to inflation and boost gold’s allure, said Philip Gotthelf, the president of Equidex Brokerage Group Inc. in Closter, New Jersey.

“If it were restricted to just one country, gold might be a little less resilient,” Gotthelf said. “You’re looking at a global meltdown. It looks like all nations will follow the U.S.’s lead in re-inflating their economies. The smart money is moving into gold.”

The Bank of England today slashed its benchmark lending rate to 1 percent, the lowest ever. The Federal Reserve last month kept the overnight lending rate at zero to 0.25 percent.

The U.S. Senate is weighing a stimulus package that tops $900 billion. Since the second half of 2007, banks worldwide have posted more than $1 trillion in writedowns and losses related to the credit crisis.

Platinum futures for April delivery rose $12.30, or 1.3 percent, to $982 an ounce on the Nymex.

Palladium futures for March delivery gained $4.20, or 2.1 percent, to $202.20 an ounce. Earlier, the price reached $205.90, the highest since Jan. 7.