Gold Climbs Most Since April as Dollar Weakens, Crude Rallies

July 15 (Bloomberg) -- Gold jumped the most in more than two months as the dollar slumped and oil rallied, boosting demand for alternative assets to hedge against inflation. Silver also rose.

A 17 percent jump in gasoline drove the U.S. consumer price index up 0.7 percent in June, the fastest pace in a year, Labor Department figures showed today. Crude-oil futures, used by some investors as an inflation-outlook guide, soared. The U.S. Dollar Index, a six-currency gauge of the greenback’s value, dropped as much as 1.1 percent. Gold tends to rise when the dollar weakens.

“Gold is steadily ticking higher, and recent dollar weakness and the gain in oil prices are favoring the move,” Pradeep Unni, a Richcomm Global Services analyst in Dubai, said today in a report. “Gold has enough potential to rise higher,” Unni said.

Gold futures for August delivery climbed $16.60, or 1.8 percent, to $939.40 an ounce on the New York Mercantile Exchange’s Comex division. That marks the biggest gain for a most-active contract since April 20.

Bullion for immediate delivery in London advanced $14.10, or 1.5 percent, to $939.80 an ounce at 8:39 p.m. local time.

While consumer prices climbed in June, the decline in U.S. industrial output slowed to lowest rate in eight months, the Federal Reserve reported today. The Empire State Manufacturing index slipped this month at the slowest pace since it last rose, in April 2008, the Federal Reserve Bank of New York said today.

Crude Soars

Crude oil gained as much as 4.1 percent to $61.98 a barrel in New York. U.S. inventories fell 2.81 million barrels last week, the Energy Department said today. That was more than the estimated 2.1 million drop in a Bloomberg News survey of analysts. The country is the world’s largest energy consumer.

Gold advanced to $938 an ounce in the London afternoon “fixing,” the price used by some mining companies to sell their output, from $930 in the morning fixing.

“The next wave of gold investment, which will take the price well above $1,000,” may follow a rise in Fed purchases of long-term government debt securities, Philip Klapwijk, the executive chairman of GFMS Ltd., said in a Bloomberg Radio interview from Madrid. “Before the end of the year, we will see that type of evolution.”

Investment in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, fell 1.4 percent to 1,094.54 metric tons as of yesterday from the previous day, the company’s Web site shows. The fund’s holdings have declined 3.5 percent from a record of 1,134.03 tons reached on June 1.

“Some of the declines in the SPDR last quarter were associated with switching gold exposure, rather than selling,” John Reade, UBS AG’s head metals strategist in London, said today in a note. “More of this activity will take place.”

Silver futures for September delivery rose 35.3 cents, or 2.7 percent, to $13.208 an ounce in New York. Earlier, the metal touched $13.38, the highest for a most-active contract since July 6.