Gold and silver price rises spurred by Libya unrest

GOLD rose above $1,430 (€1,022) an ounce yesterday, while silver surged 3% to 31-year highs, as soaring oil prices fuelled by widening unrest in Libya prompted investors to pile into safe havens.

Bullion hit a record high of $1,440.10 an ounce on Wednesday and is on track to post its fifth consecutive weekly gain, on fears that Libya’s escalating violence could spread across the Arab world.

World stocks and the dollar declined as upbeat US jobs data was offset by mounting economic uncertainty.

“It’s really all about oil, and I suspect that’s going to be the pattern next week as well. Gold’s uncertainty hedge and ultimate currency roles continue to be very much in place,” said Bill O’Neill, partner of Logic Advisors.

US crude prices jumped to their highest levels since September 2008 and Brent rose above $116 a barrel as Libyan security forces cracked down on protesters in Tripoli and clashed with rebels near the major oil terminal of Ras Lanuf.

The Reuters/Jefferies CRB commodities index, which is heavily weighted in oil, was set to notch its best gains in 13 weeks.

Spot gold hit a high of $1,431.85 an ounce and was up 1.1% at $1,430.70 by 12.13pm EST. Gold fixed at $1,427 in London. US gold futures for April delivery rose $15.80 to $1,432.20.

Gains in gold lifted silver prices, which climbed to their highest since early 1980 at $35.32 an ounce. Spot silver gained 3.3% to $35.13 an ounce.

The gold-silver ratio, which shows how many ounces of silver it takes to buy one ounce of gold, fell to a 13-year low.

Silver has risen amid a tight physical market and very strong demand for industrial metals as the economy recovers.

“Ultimately, the reasons why silver is going up are related to gold,” O’Neill said. “Make no mistake, if gold reverses direction and starts to go to a bear market, silver will follow with a vengeance.”

Gold gains accelerated after news that US nonfarm payrolls increased by 192,000 in February, above market expectations for 185,000 jobs.

While the numbers beat Reuters forecasts, many in the markets expected a still stronger number, leading to initial weakness in equities and the dollar.

“The economy is improving, growth could surprise on the upside, but the economic recovery is not producing new jobs as it has in the past, given those growth rates,” said Peter Fertig, a consultant at Quantitative Commodity Research.

(Reuters)