Investors seek golden haven

Gold, silver, platinum and palladium may be the best-performing financial assets this year as inflation and slowing growth erode the value of the world's major currencies, bonds and stocks.

Precious metals have risen at least twice as fast as the euro and yen in 2008 and returned six to 20 times as much as US Treasuries.

The Standard & Poor's 500 Index and all other major gauges of equities are down. Gold for immediate delivery reached an all-time high of $984.95 an ounce today, while silver traded at $20.19, the most expensive since 1980.

Investors are using metals to preserve their buying power as the US dollar falls to a record and inflation accelerates. Gold, platinum and palladium may gain at least 30 per cent this year as Federal Reserve Chairman Ben S Bernanke prioritizes cutting interest rates over controlling consumer prices, said Ron Goodis, a trader at Equidex Brokerage Group Inc. in Closter, New Jersey, who has been buying and selling gold since 1978.

"It is hard to see how the monetary environment is going to be anything but supportive of higher gold and commodity prices anytime this year,'' said Chip Hanlon, who holds gold as manager of $1.5 billion at Delta Global Advisors Inc. in Huntington Beach, California.

Most metals are traded in dollars, tying their prices to how much the currency buys in the world economy. Gold rose 36 per cent since September 18, when Bernanke made the first of five cuts to the target rate for overnight loans between banks in order to stave off a US recession. It's up 15 per cent since breaking the 1980 record in January, and may rise to $1,300 an ounce by yearend, Goodis said.

Platinum, palladium
Platinum and palladium "" sister metals used to make jewelry, catalytic converters for cars, and dental crowns and bridges "" have advanced even more this year.

Platinum futures in New York gained 42 per cent and touched a record $2,214.50 an ounce Feb. 22. It may advance to $3,000 by yearend, said Goodis, who correctly predicted its surge earlier this year.

Palladium will probably reach $750 an ounce by June, a 29 per cent gain from the current price, he said. Silver will advance to $25 an ounce sometime this year, estimated David Davis, an analyst at Credit Suisse Standard Securities in Johannesburg.

Record low dollar
Turmoil in the financial markets and slowing economic growth pose "greater risks'' than inflation, Bernanke told the House Financial Services Committee in Washington on Feb. 27.

The Fed "will act in a timely manner as needed to support growth and to provide adequate insurance against downside risks,'' he said, signaling he was prepared to make a sixth reduction in rates.

The US Dollar Index, which tracks the currency against six major counterparts, touched 73.445 today, the lowest since its start in 1973.

Even gold traded in euros, yen and pounds reached records this year as consumer prices rose around the world, eroding the appeal of currencies as an asset.

The Bank of England cut borrowing costs twice since November. European Central Bank President Jean-Claude Trichet resisted similar moves because inflation in the 15 nations that use the euro rose to a 14-year high of 3.2 per cent in January.