Gold May Advance, Reducing Weekly Drop, on Increased Demand From Investors

Gold May Advance, Reducing Weekly Drop, on Increased Demand From Investors
By Nicholas Larkin - Mar 11, 2011 3:23 PM GMT+0200 
Gold may gain in New York, narrowing the first weekly loss since January, as demand for the metal as an alternative asset increases.

European equities slipped for a third day and commodities including crude oil and copper fell as an 8.9-magnitude earthquake in Japan, the world’s strongest in more than six years, shook buildings across Tokyo and triggered a 10 meter- (33 feet-) high tsunami. Muammar Qaddafi’s son said Libyan government forces are mounting a full-scale attack on rebels. Gold futures retreated 1.2 percent yesterday, the most in a week.

“It is the demand for safety that is driving the buying of precious metals as geopolitical tensions in the Middle East and North Africa region escalate” Marc Ground, an analyst at Standard Bank Plc in Johannesburg, said in a report. Sovereign credit-rating downgrades have “seen market fears surrounding the euro zone debt crisis resurface” and the earthquake may also support gold, he said.

Gold futures for April delivery rose $1.30, or 0.1 percent, to $1,413.80 an ounce at 8:05 a.m. on the Comex in New York. Prices are down 1 percent this week, after reaching a record $1,445.70 on March 7. The metal for immediate delivery in London was 0.1 percent higher at $1,413.85.

Gold declined to $1,409.75 an ounce in the morning “fixing” in London, used by some mining companies to sell output, from $1,413.25 at yesterday’s afternoon fixing.

The earthquake was Japan’s strongest in at least a century, and at least 26 people were killed by the wave and many are missing, according to state broadcaster NHK Television. The Philippines, Indonesia and Papua New Guinea were among more than 20 countries bracing for a possible tsunami. A refinery on fire outside Tokyo exploded. Nuclear power stations were shut.

Inflation Concern

Concern about rising inflation and currency debasement drove gold prices up 30 percent last year for a 10th annual gain. Chinese consumer prices rose at an annual 4.9 percent pace in February. The pace of inflation was unchanged from January and compared with the 4.8 percent median forecast in a Bloomberg News survey of economists. Increasing food and commodity prices have contributed to unrest in North Africa and the Middle East that toppled leaders in Tunisia and Egypt.

Saif al-Islam Qaddafi said the Libyan government will never surrender and Western countries will lose if they support the uprising. Saudi Arabian security forces yesterday broke up a rally in the eastern city of al-Qatif before a “Day of Rage” protest planned for today, a local activist said.

European Union leaders meet today to discuss tackling the region’s debt crisis after Moody’s Investors Service this week cut credit ratings for Spain and Greece.

‘Bargain Hunting’

“Given the mix of inflation concerns and the situation in the Middle East and North Africa and European Union debt, we expect dips will continue to be viewed as bargain hunting opportunities,” James Moore, an analyst at in London, said in a report.

Ten of 16 traders, investors and analysts surveyed by Bloomberg, or 63 percent, said bullion will rise next week. Four predicted lower prices and two were neutral.

Silver for May delivery in New York declined 1.4 percent to $34.57 an ounce. It climbed to $36.745 on March 7, the highest level since March 1980. That year futures reached a record $50.35.

Palladium for June delivery was down 1.2 percent at $757 an ounce after earlier today falling to $742, the lowest level since Jan. 7. Platinum for April delivery was 0.6 percent higher at $1,776.40 an ounce.