Gold Rises to Six-Week High on Demand for Currency Alternative

March 3 (Bloomberg) -- Gold climbed to a six-week high in New York on speculation that escalating sovereign-debt concerns will boost demand for the metal as an alternative to currencies.

Greek Prime Minister George Papandreou announced an additional 4.8 billion euros ($6.6 billion) of deficit cuts as he tries to convince European allies and investors that he can tame the region’s biggest budget gap. Gold priced in euros climbed to a record yesterday.

“Gold is going to become the currency of choice as people lose faith in fiat currencies,” said Matt Zeman, a trader at LaSalle Futures Group in Chicago. “These countries continue to write checks that they can’t cash.”

Gold futures for April delivery rose $5.90, or 0.5 percent, to $1,143.30 an ounce on the Comex division of the New York Mercantile Exchange. Earlier, the most-active contract touched $1,145.80, the highest price since Jan. 15.

“There are hopes that the Greek deficit cuts will stem the tide of the declining euro,” GoldCore Ltd., a broker in Dublin, said in a report. “Concerns that the austerity measures being taken in Greece may soon have to be undertaken in other European economies and in the U.K. should lead to continuing safe-haven demand for gold.”

Gold has climbed 4.3 percent this year, while the euro is down 4.2 percent against the dollar. The metal jumped 24 percent in 2009 as record-low U.S. interest rates and government spending weighed on the dollar and countries including India and China boosted bullion reserves.

Russian Central Bank

Russia’s central bank wants to increase the proportion of its international reserves held in gold, First Deputy Chairman Alexei Ulyukayev said in an interview published in Izvestia today. His comments were confirmed by a Bank Rossii official. The bank added 100,000 ounces to its reserves in January.

“We expect stronger willingness by emerging-market central banks to buy and hold more strategic gold reserves for diversification purposes, due to lost confidence in the dollar,” Bayram Dincer, a commodity analyst at LGT Capital Management in Pfaeffikon, Switzerland, said in a report. Gold may average $1,150 this year as the metal enters a “second golden decade,” he said.

Also in New York, silver futures for May delivery rose 26.5 cents, or 1.6 percent, to $17.329 an ounce. Platinum for April delivery gained $7.50, or 0.5 percent, to $1,583.50 an ounce. Palladium for June delivery advanced $5.65, or 1.3 percent, to $450.50 an ounce.