Gold Fluctuates Near Record in London on Fed's Comments, Stronger Dollar

Gold fluctuated near a record in London on concern the U.S. economy may need more stimulus and as the dollar strengthened. Silver advanced to a 30-year high.

The dollar climbed against the euro as European officials voiced divisions over the steps needed to stop the sovereign- debt crisis. Federal Reserve Chairman Ben S. Bernanke said the central bank may boost Treasury purchases to prop up the economy. Gold, which usually moves inversely to the dollar, traded within 1 percent of a record $1,424.60 an ounce set on Nov. 9.

“Without a stronger dollar, gold would probably trade higher,” Peter Fertig, owner of Quantitative Commodity Research Ltd. in Hainburg, Germany, said today by phone. “The Bernanke comments on quantitative easing are one of the factors supporting gold.”

Immediate-delivery bullion lost $2.18, or 0.2 percent, to $1,411.90 an ounce at 11:36 a.m. in London. Prices swung between a gain and a loss of 0.3 percent and reached as high as $1,418.80. The metal for February delivery was 0.4 percent higher at $1,412.50 on the Comex in New York.

Bullion rose to $1,411.50 an ounce in the morning “fixing” in London, used by some mining companies to sell output, from $1,403.50 at the afternoon fixing on Dec. 3. Spot prices reached a record 902.5109 British pounds, data compiled by Bloomberg show.

Currency Debasement

Bernanke said unemployment may take five years to fall to a normal level and Fed buying of Treasury securities beyond the $600 billion announced last month is possible, according to a transcript of an interview for CBS Corp.’s “60 Minutes” program. Gold is set for a 10th annual gain after governments spent trillions of dollars and kept interest rates low to bolster economies. European finance ministers meet in Brussels today.

“Given that further debasing of fiat currencies is back on the agenda, it seems likely the precious metals, particularly gold and silver, are poised for fresh gains,” James Moore, an analyst at TheBullionDesk.com in London, said in a report.

Gold will likely advance to $1,500 next year on demand from investors and central banks, Bank of America Merrill Lynch said in a report dated Dec. 3. Prices are up 29 percent this year.

Silver for immediate delivery in London added as much as 1.7 percent to $29.915 an ounce, the highest price since March 1980, and was last at $29.5825. The metal is up 75 percent this year and reached an all-time high of $50.35 in New York in 1980, a year after the Hunt brothers tried to corner the market.

Ratio Falls

One ounce of gold bought as little as 47.326 ounces of silver today, the least since February 2007, data compiled by Bloomberg show. Silver will average $29.50 next year as investors buy more metal and industrial growth spurs demand, Bank of America Merrill Lynch said.

“There is some substitution impact on silver as investors also see the metal as a store of value, just like gold,” Ben Westmore, an analyst at National Australia Bank Ltd., said today by phone from Melbourne.

Palladium fell 1.4 percent to $757.50 an ounce, after reaching $779.10 on Dec. 3, the highest price since April 2001. Platinum was 0.5 percent lower at $1,718.50 an ounce. Platinum will average $2,000 and palladium will average $775 next year, according to Bank of America Merrill Lynch.