Gold climbs on Europe’s inflation concerns

Gold gained on Thursday and was supported by the levels of inflation that are currently going on in Europe. Inflation fears are the basis of gold investing and many investors find themselves flocking to the metal as a safe haven during times like these.

By Claudia Assis and Carla Mozee
June 9, 2011, 3:19 p.m. EDT

LOS ANGELES (MarketWatch) — Gold futures gained on Thursday, supported by European concerns about inflationary pressures.

Gold for August delivery GC1Q +0.15% settled $4, or 0.3%, higher at $1,542.70 an ounce on the Comex division of the New York Mercantile Exchange, breaking a two-day losing streak.

The European Central Bank kept interest rates unchanged at 1.25% on Thursday, as widely expected. But Jean-Claude Trichet, the bank’s president, said “strong vigilance” is needed against inflation.

The term is widely interpreted as signaling an interest-rate increase at the ECB’s next meeting in July. Read more about the ECB in Currencies.

Inflation fears are one of the pillars of gold investing, as the metal is seen as the ultimate storer of wealth.

Gold futures on Thursday also tracked an advance in the oil market, said Frank Lesh, a futures analyst and broker at FuturePath Trading in Chicago, in a telephone interview. “As crude moves higher, it increases our fear of inflation or inflationary expectations.”

Crude for July delivery CL1N -0.07% rose $1.19, or 1.2%, to end at $101.93 a barrel on the New York Mercantile Exchange. Oil prices rose after a surprise decision by key producers to keep production quotas unchanged, and as a bigger-than-expected decline in U.S. crude inventories fed concerns about tighter supplies. Read more about oil and supply concerns.

The broader suite of metals traded higher Thursday, with the exception of copper.

September palladium PA1U -0.07% rose $12.40, or 1.5%, to end at $818.10 an ounce. July platinum PL1N -0.17% advanced $13.50, or 0.7%, to $1,844.70 an ounce.

July silver SI1N +0.56% rose 80 cents, or 2.2%, to $37.42 an ounce.

The World Silver Institute has stressed “the growing importance of silver demand for industrial purposes,” including use in growing industries such as the photovoltaic sector, analysts at Commerzbank said.

“Given its wide range of industrial uses, we believe the price of silver will be well supported in the medium to long term,” the analysts wrote in a note.

Copper for July delivery HG1N -0.06% slipped 0.02% to $4.1075 a pound, but finished off session lows.

Claudia Assis is a San Francisco-based reporter for MarketWatch. Carla Mozee is a reporter for MarketWatch, based in Los Angeles.

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