Gold, Silver Rally on Inflation Expectations; Platinum Advances
By Pham-Duy Nguyen
Last Updated: November 14, 2008 14:20 EST
Nov. 14 (Bloomberg) -- Gold rose the most in eight weeks on speculation that
central banks will add more liquidity to unfreeze credit markets, spurring
inflation and boosting the appeal of the precious metal. Silver and platinum
also gained.
Federal Reserve Chairman Ben S. Bernanke said the U.S. and other countries are
ready to take more action to boost lending. The dollar declined against a
basket of six major currencies after dropping 0.6 percent yesterday. More
liquidity will devalue currencies and stoke inflation, said Frank McGhee, the
head dealer of Integrated Brokerage Services LLC in Chicago.
``Basically, the government needs and wants an inflationary spurt to turn this
economy around,'' McGhee said. ``Gold is probably $100 to $150 too cheap, based
on the amount of liquidity that's already been pumped into the system.''
Gold futures for December delivery rose $37.50, or 5.3 percent, to $742.50 an
ounce on the Comex division of the New York Mercantile Exchange, the biggest
gain for a most-active contract since Sept. 18. The metal is up 1.1 percent
this week.
Silver futures for December delivery jumped 69 cents, or 7.8 percent, to $9.49
an ounce. The metal is down 4.7 percent this week.
Platinum futures for January delivery rose $32.10, or 3.9 percent, to $845.10
an ounce on the Nymex. Palladium for December delivery gained $2.70, or 1.3
percent, to $216.65 an ounce.
The Fed has cut its benchmark interest rate to 1 percent from 5.25 percent in
September 2007 and provided more than $1 trillion in loans to financial
institutions to help ease the worst credit crisis in seven decades.
The collapse of Lehman Brothers Holdings Inc. on Sept. 15 helped trigger
passage of a $700 billion bailout plan by the U.S. Since then, gold traded as
high as $936.30 on Oct. 10 and as low as $681 on Oct. 24.
`Awash With Dollars'
Gold may rise as the dollar begins to slide, said Walter Otstott, a senior
broker at Dallas Commodity Co. in Dallas.
``Bargain hunters and investors are starting to appreciate gold for its
diversification attributes,'' Otstott said. ``Fundamentally, the world is awash
with dollars, and we should see the greenback resume its long-term downward
trend.''
The metal reached a record $1,033.90 in March as the decline in borrowing costs
sent the dollar to an all-time low against the euro in July
