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GOLD

Gold Rises as Investors Seek Store of Value; Silver Advances

By Pham-Duy Nguyen

Feb. 5 (Bloomberg) -- Gold rose the most this week on speculation the global recession will boost demand for precious metals as a store of value. Silver also gained.

Goldman Sachs Group Inc. said yesterday gold will rise to $1,000 an ounce within three months, up 43 percent from the bank’s previous forecast. Investment in the SPDR Gold Trust, the biggest exchange-traded fund backed by bullion, rose to a record 859.5 metric tons yesterday. Gold has rallied 34 percent after touching a 13-month low on Oct. 24.

“Gold is telling you that all paper assets are suspect,” said Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago. “As the recession deepens, there’s significant flows into gold as an asset class or a currency that cannot vanish overnight.”

Gold futures for April delivery rose $12, or 1.3 percent, to $914.20 an ounce on the Comex division of the New York Mercantile Exchange, the biggest gain since Jan. 30. The metal climbed 1.1 percent yesterday.

Silver futures for March delivery rose 28 cents, or 2.2 percent, to $12.75 an ounce. The metal has climbed 13 percent this year, while gold is up 3.4.

The SPDR Gold Trust is the seventh-largest holder of bullion behind central banks and the International Monetary Fund, according to data from the World Gold Council. The U.S. Federal Reserve is the largest holder.

Equities Slump

Assets in the SPDR Gold Trust rose 8.1 percent in January as the price of gold gained 5 percent. The Standard & Poor’s 500 Index lost 8.6 percent last month, while the Reuters/Jefferies CRB Index of 19 raw materials declined 4 percent.

Governments worldwide are lowering interest rates and spending trillions of dollars to revive their economies, which will lead to inflation and boost gold’s allure, said Philip Gotthelf, the president of Equidex Brokerage Group Inc. in Closter, New Jersey.

“If it were restricted to just one country, gold might be a little less resilient,” Gotthelf said. “You’re looking at a global meltdown. It looks like all nations will follow the U.S.’s lead in re-inflating their economies. The smart money is moving into gold.”

The Bank of England today slashed its benchmark lending rate to 1 percent, the lowest ever. The Federal Reserve last month kept the overnight lending rate at zero to 0.25 percent.

The U.S. Senate is weighing a stimulus package that tops $900 billion. Since the second half of 2007, banks worldwide have posted more than $1 trillion in writedowns and losses related to the credit crisis.

Platinum futures for April delivery rose $12.30, or 1.3 percent, to $982 an ounce on the Nymex.

Palladium futures for March delivery gained $4.20, or 2.1 percent, to $202.20 an ounce. Earlier, the price reached $205.90, the highest since Jan. 7.

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General Market Commentary

By Ka Yan Ng

Thu, Feb 5 - 12:50pm EST

TORONTO (Reuters) - Toronto's main stock index was higher at midday on Thursday, lifted by strength in mining companies as gold prices got a boost from safe-haven buying, while financials shares rebounded on hope for the U.S. banking sector.

The resource-laden materials group rose 2.9 percent and led the index higher. Among gainers were miners Barrick Gold, up 2.8 percent at $47.00, and Kinross, up 3.3 percent at $22.19.

"Gold appears to be the one bright spot in the market again," said Michael Sprung, president at Sprung & Co. Investment Counsel.

The big financial services sector also helped the index, fighting back from an earlier drop of 1.6 percent. At midday it was up 1.3 percent.

The rebound in financial shares occurred as U.S. stocks hit a session high, with traders citing speculation about changes to mark-to-market accounting rules, a requirement for recognition of losses that has resulted in billions of dollars of writedowns for U.S. banks.

Royal Bank of Canada rose 2.1 percent to $31.25.

Canadian financials have been pressured by "extreme negative sentiment on the U.S. financials side," said Vincent Delisle, strategist at Scotia Capital, in Montreal.

"Investors are still very uncertain, uncomfortable and scared of a worst-case scenario," he said.

At 12:18 p.m. EST, the S&P/TSX composite index was up 104.26 percent, or 1.2 points, at 8,797.35, with nine of its 10 main groups higher.

In the morning, anxiety ahead of Friday's January jobs reports from Canada and the United States had weighed on financials, which had helped to push the S&P/TSX composite down by nearly 1 percent.

Auto-parts maker Magna International and plane and train maker Bombardier were among several Canadian companies to announce layoffs.

Bombardier was down 2.2 percent at $3.64 after it said it plans to cut more than 1,300 jobs as it braces for a 10 percent drop in business jet orders.

Magna was up 2.6 percent at $36.69 after it said it would shut a plant in Syracuse, New York, which will ultimately eliminate 1,400 jobs.

"Jobs are going to front and center for the next while. The economy is still in a deteriorating phase and job losses are likely to grab headlines for the next while and I think the market is going to react negatively to those," Sprung said.

The oil and gas group rose 0.24 percent, even as the price of crude dropped to around $40 a barrel. Husky Energy fell 2.5 percent to $29.17 as Canada's No. 2 oil producer and refiner reported a drop in quarterly results and chopped its dividend.

In individual company news, Certicom Corp said Research In Motion's $3-a-share sweetened takeover offer for the electronic security company is a superior bid to a previous bid from VeriSign Inc.

Certicom rose 1.6 percent to $3.21, while RIM rose 0.74 percent to $69.61.

Brookfield Properties, one of Manhattan's biggest landlords, reported a small increase in quarterly funds from operations, while net income jumped due to a gain. Brookfield was up 16.9 percent at $7.48.

($1=$1.23 Canadian)

TSX / 8860.98 / +167.89 / +1.93%