TheAustralian.news.com.au

Gold jumps on US inflation risks

Sept. 23, 2008
By Angie Pointer

GOLD rose sharply as investors remained on edge over the US government's rescue plan and fretted over the inflationary implications.

A sharp sell-off in the US dollar and surge in crude oil added to the buying frenzy in precious metals.

December gold rose $US44.30 to $US909 an ounce on the Comex division of the New York Mercantile Exchange. December silver climbed US97.5 cents to $US13.45.

The Bush administration has proposed some $US700 billion ($840 billion) in spending to buy credit securities that have gummed the financial markets for months. A final version must be approved by Congress.

Daniel Pavilonis, senior market strategist with Lind-Waldock, said the market was looking at the bailout as something "that could be a good thing, but could be a bad thing".

"There is uncertainty in the market, meaning there is going to be the flight to quality that we've been seeing," he said.

It has furthermore prompted concerns about rising price pressures, he continued.

"They are pumping so much money now that it's going to create more inflation," he said. "So we're seeing more inflationary trading. I think commodities across the board are going back up."

The dollar was also on the defensive, which tends to underpin gold. A currency-market analyst cited worries about the size of the massive government bailout proposal. Around gold's close, the euro was up to $US1.4792 from $US1.4464 late Friday.

George Gero, vice president with RBC Capital Markets Global Futures, cited investment buying of gold not only due to weaker equities and inflation concerns but worries about deficits.

"Finally, central banks may rethink selling gold, (and) some may even buy some to back up their currencies," Mr Gero said.

Platinum group metals also were higher. October platinum rose $US88.80 to $US1235.80 an ounce, while December palladium gained $US18.80 to $US255.75.

The Australian
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