Gold Climbs to Seven-Week High on Jobless Rise; Silver Advances

May 14 (Bloomberg) -- Gold rose to the highest closing price in seven weeks as investment demand for the metal increased after reports showed a gain in U.S. producer prices and a rise in initial claims for jobless benefits. Silver also advanced.

The number of first-time applicants seeking unemployment insurance jumped to 637,000 last week, threatening to restrain consumer spending and prolong the recession. A separate report showed prices paid to U.S. producers climbed in April, paced by a 1.5 percent increase in consumer foods, pushing back the risk of deflation taking root in the economy.

“There is some rotation from other markets into gold, mainly because of safe-heaven demand,” said Stephen Platt, an Archer Financial Services Inc. commodity analyst in Chicago. “The market could certainly work itself higher.”

Gold futures for June delivery rose $2.50, or 0.3 percent, to $928.40 an ounce on the New York Mercantile Exchange’s Comex division. That’s the highest close for a most-active contract since March 26.

Gold probably will trade in a range of $920 to $940 for the next week to 10 days, Platt said.

Silver futures for July delivery advanced 2 cents, or 0.1 percent, to $14.04 an ounce. The most-active contract is up 24 percent this year, while gold has gained 5 percent.

“Silver will have trouble moving above the February high,” said Tom Pawlicki, an analyst at MF Global in Chicago, citing declining fabrication and jewelry demand. “Prices could fall toward $13.50 in the near-term.”

Unemployment Record

Initial claims for jobless benefits rose by 32,000 last week, the U.S. Labor Department reported today in Washington. Economists forecast a gain to 610,000 initial jobless claims, the median of 38 estimates in a Bloomberg News survey.

The number of U.S. workers collecting unemployment insurance climbed 3.2 percent to 6.56 million in the week ending May 2, the Labor Department said. That set a record for the 15th straight week and shows employers still aren’t hiring.

The 0.3 percent increase in U.S. producer-price index last month followed a drop of 1.2 percent in March. Economists projected a rise of 0.2 percent, the median estimate of 68 surveyed by Bloomberg. Excluding fuel and food, so-called core prices rose 0.1 percent.