Gold Tops $975 on Demand for Store of Value; Silver Also Climbs

Feb. 17 (Bloomberg) -- Gold jumped to more than $975 an ounce, the highest price since July, on speculation that low interest rates and government spending will devalue currencies, boosting the appeal of precious metals as a store of value. Silver and platinum also rose.

Gold priced in euros and pounds reached records today as equities worldwide slumped on concern that the global recession may deepen. Investment in the SPDR Gold Trust, the biggest exchange-traded fund backed by bullion, rose 14 percent last week to a record 985.9 metric tons. Gold is up 9.4 percent this year.

“Gold is rallying against all currencies,” said Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago. “Up the road, you’re looking at governments devaluing their currencies to pay for the financial crisis. It’s the ultimate flight to safety for gold.”

Gold futures for April delivery gained $25.30, or 2.7 percent, to $967.50 an ounce on the Comex division of the New York Mercantile Exchange. Earlier, the price reached $975.40, the highest since July 22. Floor trading was closed in New York yesterday for a U.S. holiday.

Benchmark interest rates in the U.S. and Japan are near zero. The Bank of England slashed its rate to 1 percent this month, the lowest ever. President Barack Obama is set to sign into law a $787 billion U.S. stimulus bill, increasing the government’s commitments to $9.7 trillion to ease the recession and the banking crisis.

Bank Rout

Eastern European bank shares tumbled to six-year lows and stocks in Europe, Asia and the U.S. fell on concern banks may face rating downgrades and further losses. Banks worldwide have posted almost $1.1 trillion in writedowns and credit losses since the second quarter of 2007, when the U.S. subprime-mortgage market collapsed.

Russia’s central bank raised gold’s share in reserves, and plans to continue this trend in 2009, Reuters reported yesterday, citing Alexei Ulyukayev, the bank’s first deputy chairman.

“Gold has become, for all intents, the world’s second reserve currency,” Dennis Gartman, an economist and the editor of the Gartman Letter in Suffolk, Virginia, said today in a Bloomberg Television interview.

Gold rose 5.5 percent last year, the eighth-straight annual increase, while the Reuters/Jefferies CRB Index of 19 commodities fell 36 percent and the Standard & Poor’s 500 Index plunged 38 percent. The S&P dropped as much as 4.5 percent today and the CRB Index fell as much as 3.9 percent.

Gold ‘Safest’ Haven

“Everyone is looking for a safe haven, and gold is the safest and most-liquid haven of them all,” said James Turk, founder of GoldMoney.com, which had $548 million of gold, silver and currency in storage for investors at the end of January.

Gold’s price reached a record $1,033.90 an ounce on March 17 in New York and ended last year down 14 percent from that mark as falling asset prices forced investors to sell the metal to cover losses in other markets.

Gold may sustain gains above $1,000, said UBS AG metals strategist John Reade. The bank on Feb. 4 said gold will average $1,000 this year, up from an October forecast of $700.

“If the recent interest in gold has the characteristics of a mania, then it is an early-stage mania, we believe, based on the potential for additional investment,” Reade said yesterday in a report.

Silver futures for March delivery rose 38.5 cents, or 2.8 percent, to $14.01 an ounce in New York. Silver fell 24 percent in 2008 and is up 24 percent this year.

Platinum futures for April delivery climbed $37.30, or 3.5 percent, to $1,098.30 on Nymex. Platinum, which plunged 38 percent in 2008, has surged 17 percent this year.

Palladium futures for March delivery rose $1.40, or 0.6 percent, to $217.90 an ounce. Palladium dropped 50 percent in 2008 and has gained 15 percent this year.