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Oct. 8 (Bloomberg) — Gold climbed to a record for a third day and crude oil, copper, wheat and rubber all advanced as the dollar’s slump prompted investors to buy commodities as a hedge against potential inflation.
Bullion is heading for a ninth annual gain as the Dollar Index, a six-currency gauge of the dollar’s value, has shed 6.4 percent this year. Oil has gained 58 percent since the start of the year on concern that record government spending to combat the global recession will devalue currencies, spurring inflation.
“The commodities trade is a weak dollar trade,” said Tim Condon, chief Asian economist with ING Groep NV in Singapore. “The huge expansion of the Federal Reserve’s monetary base argues for inflation accelerating.”
Gold for immediate delivery climbed as high as $1,055.60 an ounce, and was at $1,055.49 at 2:50 p.m. in Singapore. It has risen 16 percent over the past year. Gold for December delivery in New York gained to a record $1,056.70 an ounce.
“There is such a premium in crude right now that comes down to the inflation hedge,” said Jonathan Kornafel, a director at options traders Hudson Capital Energy in Singapore. “There has been more focus on the dollar this week.”
Crude oil for November delivery gained as much as 91 cents, or 1.3 percent, to $70.48 a barrel on the New York Mercantile Exchange. The contract was at $70.34 a barrel at 2:29 p.m. in Singapore.
Fed’s Program
President Barack Obama has increased U.S. marketable debt to a record as he borrows to reignite growth in the world’s biggest economy. That’s boosted speculation the increased money supply will debase the currency and spur inflation.
The Federal Reserve has cut its main interest rate almost to zero and backed asset purchases and credit programs to combat the recession. Chairman Ben S. Bernanke is leading plans to buy $1.25 trillion of mortgage-backed securities and as much as $200 billion of federal agency debt by March, along with $300 billion of long-term Treasuries by October.
The increase in the U.S. money supply and “abandonment of the dollar have taken the smart people over to precious metals,” according to Philip Gotthelf, president of Equidex Brokerage Group Inc.
Gold may top $2,000 an ounce in the next decade, according to investor Jim Rogers. “People are printing money, gold is going up,” Rogers said in a Bloomberg Television interview yesterday, adding that he may increase his holdings. “There are plenty of reasons to buy gold when the time is right,” he said.
‘Fear of Inflation’
Three-month copper on the London Metal Exchange advanced as much as 2.5 percent to $6,250 a ton, as lead, nickel, tin and zinc also climbed. Wheat futures rose 1.1 percent. “The fear of inflation is telling people to go buy commodities,” including the grain, Darrell Holaday, president of Advanced Market Concepts, said yesterday.
The dollar traded at $1.4758 against the euro at 1:56 p.m. in Singapore, from $1.4691 yesterday. The U.S. currency fell earlier this week on concern the Federal Reserve will be slower to raise interest rates than policy makers in other nations.
A further blow to the dollar came after an Oct. 6 report in Britain’s Independent newspaper that said that Arab states may switch to a basket of currencies to set oil prices over the next nine years. Still, the Saudi Central Bank Governor Muhammad al- Jasser denied such a move is being considered.
“Bullish gold gave support to the price of other commodities, including rubber,” Kazuhiko Saito, chief analyst at Tokyo-based broker Fujitomi Co, said today. Rubber futures gained as much as 2.1 percent.
Australia’s central bank unexpectedly raised its overnight cash rate target to 3.25 percent on Oct. 6, the first Group of 20 nation to boost lending costs since the height of the global financial crisis. The country today reported an unexpected gain in employment, leading to an increase in speculation of a further climb in the benchmark.
Brent crude oil for November settlement gained as much as 88 cents, or 1.3 percent, to $68.08 a barrel on the London-based ICE Futures Europe exchange. It was at $67.85 at 12:23 p.m. in Singapore. Yesterday, the contract fell 2 percent.
Source: Bloomberg