Gold Rises on Haven Demand After Japanese Earthquake, Tsunami

March 14, 2011, 2:53 PM EDT
Bloomberg Businessweek

By Pham-Duy Nguyen

March 14 (Bloomberg) -- Gold futures rose for the second straight session as Japan’s strongest earthquake on record boosted demand for a haven asset. Palladium fell for an eighth straight session, the longest slump since July 2008.

Equities declined worldwide as officials said the death toll from the earthquake and tsunami may top 10,000. Technicians tried to contain damage from a second explosion at a nuclear plant north of Tokyo.

“Given the global political and financial uncertainty, you’re seeing investors shifting assets away from dollars and other currencies into hard assets,” said Stephen Platt, an analyst at Archer Financial Services Inc. in Chicago. “You’re still going to see a lot of excess liquidity being pumped into these markets that will encourage a flight to metals as a safe haven.”

Gold futures for April delivery rose $3.10, or 0.2 percent, to settle at $1,424.90 an ounce at 2:05 p.m. on the Comex in New York. The price climbed 0.7 percent on March 11. The metal has gained 29 percent in the past year.

The Bank of Japan poured a record 15 trillion yen ($183 billion) into the world’s third-biggest economy today as the earthquake triggered a plunge in stocks and surge in credit risk. The central bank also doubled the size of its asset- purchase program to help shield the economy from the effects of the quake.

Gold’s gains were limited after crude oil touched a two- week low, easing demand for an inflation hedge. Gold reached a record $1,445.70 on March 7 as oil topped $106 a barrel amid escalating violence in the Middle East and northern Africa.

Platinum Drops

Palladium and platinum, used mainly in pollution-control devices in vehicles, fell on concern that industrial demand will ease as damage from the quake hinders the global economy, said Dennis Gartman, an economist and the editor of the Suffolk, Virginia-based Gartman Letter.

Companies including Toyota Motor Corp., Honda Motor Co. and Nissan Motor Co. shut some plants in Japan following the quake.

“Gold has risen sharply higher, while platinum and palladium have fallen equally as sharply,” Gartman said. “These moves imply a material weakening of the global economy.”

Palladium futures for June delivery fell $17.30, or 2.3 percent, to close at $748.20 an ounce on the New York Mercantile Exchange. The price has dropped 9.1 percent since March 2.

Platinum futures for April delivery declined $29.40, or 1.7 percent, to $1,752.30 an ounce on the Nymex.

Silver futures for May delivery fell 9.5 cents, or 0.3 percent, to $35.84 an ounce on the Comex. The metal has more than doubled in the past 12 months.

--With assistance by Nicholas Larkin in London and Kyuongwha Kim in Singapore. Editors: Steve Stroth, Patrick McKiernan

To contact the reporter on this story: Pham-Duy Nguyen in Seattle at pnguyen@bloomberg.net

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net

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