Gold Rises as Positive Outlook Boosts Demand for Inflation Hedge
Gold has climbed recently trading as equity gains and an improving economic outlook boosted demand for the metal as a hedge against accelerating prices.
The MSCI Asia Pacific Index of equities gained for a sixth day after an index of leading economic indicators in the U.S. topped projections, indicating the country may be emerging from recession. Federal Reserve Chairman Ben S. Bernanke wrote in the Wall Street Journal that the central bank “will need to tighten monetary policy” to prevent inflation.
“An improving economic outlook is leading investors to the risk of inflation, which will become more pronounced over time, bolstering demand for gold,” said Hwang Il Doo, a commodities broker with KEB Futures Co. in Seoul. “Still, the metal may face some resistance above $950 in the short term.”
The precious metal has climbed 8 percent this year.
Bullion jumped to $954.99 yesterday, the highest since June 12, as the Dollar Index, a gauge of the dollar’s value against six major currencies, fell to the lowest since June 3. The index was little changed at 78.934.
Gold holdings in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, were unchanged for a second day at 1,094.54 metric tons yesterday, down from this year’s peak of 1,134.03 tons in June, according to the company’s Web site. Investment in Gold exchange traded funds has cooled of from extreme levels during the recent credit crunch, however fear’s of rising inflation could stimulate investors once again.