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Gold Rises for Fifth Day on Inflation Concern
Sept. 20, 2005

Sept. 20 (Bloomberg) -- Gold rose for the fifth straight day as a surge in energy prices renewed concern the pace of inflation may accelerate.

Gold for immediate delivery yesterday touched $468.65 an ounce, the highest since January 1988, as oil prices jumped 7 percent on concern Tropical Storm Rita may strengthen into a hurricane before striking Texas. Investors buy gold to hedge against inflation, which erodes the value of other fixed-asset investments, such as bonds.

``Speculators continued to buy on the back of inflationary worries and uncertainty about the U.S. economy,'' Darren Heathcote, head of trading at N.M. Rothschild & Sons (Australia) Ltd., said in a report e-mailed today.

Gold for immediate delivery rose as much as $2.50, or 0.5 percent, to $467.25 an ounce. It traded $2.05 higher at $466.80 an ounce at 12:46 p.m. Singapore time.

Japanese trading companies were closed yesterday for a public holiday. Buyers in Japan bought ``huge amounts'' of gold today, said Gordon Cheung, director of precious metals at Mitsui Bussan Precious Metals (Hong Kong) Ltd.

Most of the buying was to close out bets that prices would decline, he said. Spot gold rose 1.5 percent from late Friday trade in New York.

On the Tokyo Commodity Exchange, gold for delivery in August 2006, the most actively traded contract, rose 40 yen, or 2.5 percent, to 1,675 yen a gram, ($468 an ounce), the maximum daily gain allowed.

Gold Coin Demand

That's the highest since May 20, 1991, Kouske Araki, an official at the exchange's public relations department, said today in an e-mailed reply to questions.

Staff at Montreal-based Kitco Precious Metals Inc., an online bullion and gold-coin dealer, have had to take shorter breaks to field phone calls and Internet orders that have doubled in the past three days, company president Bart Kitner said yesterday. The most popular products are the American Eagle coin, the Canadian Maple Leaf coin, and pure gold bars, he said.

American Eagle coin sales rose to 49,500 coins in August from 37,500 in July and 31,000 in June, according to the U.S. Mint.

Investors and traders are awaiting today's Federal Reserve meeting to see whether it will raise interest rates in the aftermath of Hurricane Katrina, said Rothschild's Heathcote.

``An increase in U.S. interest rates would be negative for gold and would provide funds with a reason to take profits, leading to a sell-off in gold that could be viewed as a consolidation phase before the metal tries for the $470 level,'' he said.

$525 an Ounce?

Gold for immediate delivery may rise as high as $470 an ounce this quarter, from a previous forecast of $450, Barclays Capital said in a weekly report e-mailed yesterday from London.

Barclays Capital, the investment-banking arm of Barclays Plc, is one of the nine market-making members of the London Bullion Market Association.

Newmont Mining Corp. President Pierre Lassonde expects gold to rise to $525 an ounce by January, according to an interview published yesterday in Le Temps.

Gold prices will then stabilize within a range $25 higher or lower than $525, Lassonde told the Geneva-based newspaper. The surge in prices will be triggered by a depreciation in the dollar, the newspaper quoted him as saying.

Gold for December delivery fell 20 cents to $470.20 an ounce in after-hours trading on the Comex division of the New York Mercantile Exchange at 12:35 p.m. Singapore time.

It rose as high as $472.40 an ounce yesterday, the highest since June 1988.

To contact the reporter on this story:
Chia-Peck Wong in Singapore  at cpwong@bloomberg.net.

I've seen projections of gold reaching $1000 an ounce. Gold rises about six months before inflation hits hard. With gas prices falling and heating oil prices rising to record highs this winter it's still a toss-up. Inflation is here, but it's still too early to say how bad it's going to get. But if push came to shove, I'd say inflation is going to soar. Walmart, for example, had lower profits not because of gas prices but because of utility bills. When utilities bills hurt Walmart the cost of inflation (and higher utility bills) be far behind for the rest of us?