Gold Climbs to Record as Debt Concern, Inflation Boost Investment Demand

Gold climbed to a record, trading at more than $1,500 an ounce, as demand climbed as investors sought to protect their wealth from further currency debasement and accelerating inflation.

Immediate-delivery gold advanced as much as 0.3 percent to $1,506.32 an ounce and traded at $1,505.32 at 8:56 a.m. in Singapore. Bullion for June delivery in New York rose as much as 0.5 percent to $1,506.30 an ounce, nearing a record $1,506.50.

The dollar, trading near a 15-month low against the euro, has dropped after Standard & Poor’s lowered the U.S. credit- rating outlook this week to negative, citing the widening deficit. The Treasury Department has projected the government will reach its $14.3 trillion debt-ceiling limit no later than May 16 and run out of options for avoiding default by early July.

“U.S. Treasury numbers are showing that U.S. debt cannot be repaid without a dollar debasement,” Lachlan Shaw, an analyst at Commonwealth Bank of Australia, wrote in a note today. “Demand is also growing for gold as an inflation hedge.”

Treasury Secretary Timothy F. Geithner said this week that the U.S. will “absolutely” keep its AAA rating, speaking in an interview on Fox Business Network. Geithner said yesterday in an interview on Bloomberg Television that he’s confident U.S. political leaders will bridge differences on spending.

Gold is on course for an 11th annual advance on increased investment demand for commodities and on concern that inflation will accelerate after governments worldwide spent $2 trillion to stimulate economies. Violence in the Middle East, sovereign- debt turmoil in Europe and Japan’s nuclear crisis have also helped propel bullion 31 percent higher in the past year.

The Thomson Reuters/Jefferies CRB Index of 19 commodities rose as much as 1.7 percent. Commodity assets under management rose to a record $412 billion in March, Barclays Capital said in an e-mailed report yesterday.

Gold futures in Shanghai rose to a record for a second day, touching 316.16 yuan ($48.45) per gram. Cash silver was little changed at $45.3138 an ounce, approaching the record $49.45 an ounce set in 1980. Palladium increased 0.7 percent to $765 an ounce and platinum gained 0.2 percent to $1,806.75 per ounce.