Gold climb continues

Gold (COMEX:GCJ14) futures rose for the second straight day amid forecasts that U.S. borrowing costs will hold at a record low and European inflation will pick up gradually.

Expectations that interest rates won’t rise until mid-2015 are appropriate, William Dudley, the president of the Federal Reserve Bank of New York, said today. European Central Bank President Mario Draghi said that the inflation rate will gain in the next 30 months, damping deflation risks. Yesterday, gold climbed after U.S. service industries expanded in February at the slowest pace in four years.

Through yesterday, gold climbed 11% this year on demand for a haven amid turmoil in Ukraine and concern that the U.S. is faltering. The Labor Department will release jobs data tomorrow. In 2013, the metal tumbled 28%, the most since 1981, as global equities rallied and U.S. inflation was muted.

“Comments from Dudley and Draghi have helped gold find support,” David Lee, a vice president at Heraeus Precious Metals Management in New York, said in a telephone interview. “People will be closely watching tomorrow’s employment numbers to assess the health of the economy.”

Gold futures for April delivery gained 0.7% to $1,350.20 an ounce at 12:02 p.m. on the Comex in New York. On March 3, the price reached $1,355, the highest for a most-active contract since Oct. 30.

Stimulus Cutbacks

Fed Chair Janet Yellen said last week the central bank is “open to reconsidering” the pace of cuts in monetary stimulus should the economy waver. The Fed, which next meets March 18-19, announced a $10 billion reduction in bond buying at each of its past two meetings, leaving purchases at $65 billion.

“While the situation between Russia and Ukraine has improved, the uncertainty of it is still expected to lift demand for a safe haven,” said Wang Xiaoli, chief investment strategist at CITICS Futures Co. in Shenzhen, a unit of China’s biggest listed brokerage. “On the downside, the pace of tapering isn’t expected to change unless U.S. economic data turns really bad.”

Gold surged 70% from December 2008 to June 2011 as the central bank pumped more than $2 trillion into the financial system and lowered interest rates to a record low to boost growth.

Silver (COMEX:SIJ14) futures for May delivery climbed 1.5% to $21.58 an ounce on the Comex.

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