Gold Gains for 1st Time in Five Days; Platinum Rises to Record

By Claudia Carpenter

Feb. 6 (Bloomberg) -- Gold rose in London on speculation investors will add to holdings of the metal to take advantage of a 5 percent drop from a record last week. Platinum climbed to an all-time high.

Assets in the StreetTracks Gold Trust, the biggest fund backed by gold, have held at 631 metric tons this month even as prices peaked at a record $936.92 an ounce on Feb. 1. Gold today snapped its biggest four-day decline in two months.

``The market's seen a reasonable pullback and yet we've seen very few redemptions'' for gold funds, said Jeremy Charles, global head of precious metals in London at HSBC Bank USA, which holds the gold in vaults for StreetTracks. ``A lot of people who missed the whole rally are just hoping to get on board.''

Gold for immediate delivery advanced $7.22, or 0.8 percent, to $895.39 an ounce as of 11:25 a.m. in London. The metal fell 1.7 percent yesterday and 2.2 percent on Feb. 1.

Demand picked up ``a little bit'' from buyers in the Middle East, Charles said.

The Federal Reserve has reduced its benchmark interest rate twice this year even after U.S. inflation last year rose the most in 17 years. Prices paid by consumers have been rising faster than 3 percent deposit rates in the U.S., giving savers a negative real rate of return. Costs are also rising from the U.K. to Italy, Singapore and China.

``Cash doesn't offer any solace when you have negative real rates,'' said Ben Davies, chief executive officer of Hinde Capital Ltd. in London who helps manage the Hinde Gold Fund. ``We have heightened and consistent inflation not only in the U.S. but all around the world. That's a huge part of why people are buying gold.''

Platinum Advances

Platinum gained $36.25, or 2.1 percent, to $1,808.75 an ounce after earlier rising to a record $1,819.

It has led gains in precious metals in the past two weeks after mining was disrupted by power cuts in South Africa, the world's biggest producer.

Platinum output may be cut as much as 500,000 ounces this year because of power shortages, Martyn Whitehead, a director at Barclays Capital, said from Cape Town yesterday. South Africa's production was 5.2 million ounces last year, London-based Johnson Matthey Plc estimated in November.

Platinum stockpiles to cushion any decline may be as low as 1 million ounces, John Reade, an analyst in London at UBS AG, wrote in a report today. Adding to the supply pressures, investors have bought about 79,000 ounces of platinum this year. If that pace keeps up, ``then we expect a major liquidity squeeze in platinum at some point in 2008,'' he wrote.

New Projects

Impala Platinum Holdings Ltd., the world's second-largest producer, said new South African projects may be delayed by the shortage of electricity.

``Given the current situation, it's going to be difficult to get new projects up and running,'' Bob Gilmour, Impala's spokesman, said in an interview in Johannesburg today. ``If the project has not already been allocated power, it will probably just have to go into the queue.''

Silver for immediate delivery advanced 10 cents to $16.455 an ounce in London. Palladium gained $3.75 to $419.75.

Gold has climbed 7.3 percent this year, platinum is up 19 percent, palladium has gained 13 percent and silver rose 11 percent. The UBS Bloomberg Constant Maturity Commodity Index of 26 raw materials is up 4 percent this year.

To graph technical gauges for gold: Moving Averages Relative Strength Index Fibonacci Back Test Technical Gauges

To contact the reporter on this story: Claudia Carpenter in London at [email protected] or [email protected]