* Gold breaks out to record on inflation fears, debt worry
* Bernanke's inflation comment spooks investors into gold
* Silver at 31-year peaks as oil, grains hit new highs
* Coming up: ECB rate-setting meeting Thursday
(Adds options comment in paragraph 7)
By Frank Tang
NEW YORK, April 5 (Reuters) - Gold jumped to an all-time
high above $1,450 an ounce on Tuesday, as peak crude and corn
prices fanned inflation fears and a downgrade of Portugal's
credit rating drew attention to euro zone problems.
Bullion rose more than 1 percent, its biggest gain in more
than a month of range-bound trading. Silver soared to a 31-year
peak. Both drew support from Federal Reserve Chairman Ben
Bernanke's comments late on Monday suggesting he was committed
to completing a $600 billion stimulus program as scheduled in
June.
On technical charts, gold broke above a recent double-top
technical formation around $1,440 an ounce. This added to a
rush of buying triggered by news that Portugal's leading banks
threatened to stop buying government debt hours after a Moody's
downgrade. []
"Bernanke's comment makes inflation a more real event in
the United States. He at least acknowledged the fact that the
Fed needs to monitor inflation very closely, and that spooked
investors into gold," said Mark Luschini, chief investment
strategist at broker-dealer Janney Montgomery Scott with $53
billion in assets under management.
Spot gold <XAU=> gained 1.1 percent to $1,452.31 an ounce
at 3:16 a.m. EDT (1916 GMT), off the session high, a record
$1,455.06 an ounce.
U.S. gold futures for June delivery <GCM1> settled up 1.4
percent at $1,452.50, with trading volume approaching 160,000
lots, about one-fourth below the 30-day average but sharply
higher than that of Monday's.
COMEX gold options floor trader Jonathan Jossen said
options volatility was subdued despite a rally in underlying
futures. However, quiet options trade has in the past
foreshadowed a sharp move in gold prices, Jossen said.
Investor Dennis Gartman, publisher of the Gartman Letter,
said gold was free from liquidation pressure once it breached
$1,441 an ounce, a level which had triggered selling.
"It appears that gold is beginning a new up-trend after its
recent consolidation," said Adam Sarhan of Sarhan Capital. "If
gold negates this breakout and falls back below $1,440 to
$1,430, one would expect sideways action to continue."
(Graphic: http://link.reuters.com/dak88r )
Silver <XAG=> gained 1.8 percent to $39.12 an ounce, after
hitting a session high of $39.25. That was the highest since
the Hunt Brothers cornered the market in the early 1980s, when
silver briefly hit a record of just below $50 an ounce.
Silver outperformed gold in the first quarter, rising 22
percent while gold rose 0.7 percent. The gold:silver ratio,
which shows how many silver ounces are needed to buy an ounce
of gold, fell to a 28-year low at 37.3. (Graphic:
http://r.reuters.com/seh88r )
UBS said silver investors show no sign of being ready to
sell, even though there is a "real danger that silver prices
have travelled too fast, too soon." Silver at $40 an ounce
appears inevitable in the near term, UBS said.
Rising oil and grain prices boosted gold's appeal as an
inflation hedge. Brent crude rose to a 2-1/2-year highs on
geopolitical risks to supply from the Middle East, while corn
futures hit a record high on persistent worries over tight
supplies. [] []
FED MONETARY POLICIES EYED
On Monday, Bernanke said an increase in U.S. inflation has
been driven primarily by rising commodity prices globally, and
was unlikely to persist. He said the Fed would monitor
inflation and inflation expectations very closely.
"What it shows is that big money continues to believe gold
will go higher...because Bernanke wants to grow at any cost,"
said Axel Merk, portfolio manager of the Merk Mutual Funds,
which manages more than $600 million of fund assets.
Gold rose more after the Fed released minutes of its March
15 meeting, showing some Fed officials believed they would have
to hold to an easy monetary policy course beyond this year,
while a few said the central bank should move to tighter
conditions before year-end. []
Last November, the Fed initiated a $600 billion bond buying
program. The program is scheduled to end in June. Gold has been
a major beneficiary since the Fed has kept short-term rates
near zero since December 2008.
Gold is also benefiting from concerns that some smaller
euro zone economies such as Portugal and Ireland will keep
struggling with sovereign debt, and from jitters over Western
air strikes in Libya and unrest in the Middle East.
Earlier in the session, gold fell in tandem with other
commodities after China raised interest rates for the second
time this year.
Gold has largely ignored previous monetary tightening from
China, which tends to weigh more heavily on industrial
commodities like copper. In addition, official data from China
shows that inflation appears to be tapering off after its
series of rate hikes this year. (Graphic of China rate hikes:
http://r.reuters.com/veh88r )
Investors will seek more clues from an interest rate
decision from an European Central Bank policy meeting on
Thursday. The ECB is widely expected to raise its benchmark
rate by 25 basis points to 1.25 percent.
Higher interest rates usually weigh on gold, but the metal
could gain if rate differentials weaken the U.S. dollar.
For platinum group metals, platinum <XPT=> rose 0.4 percent
to $1,786.99 an ounce, while palladium <XPD=> also gained 0.9
percent to $786.22.
Prices at 3:16 p.m. EDT (1916 GMT)
LAST/ NET PCT YTD
CLOSE CHG CHG CHG
US gold <GCM1> 1452.50 19.50 1.4% 2.2%
US silver <SIK1> 39.183 0.689 0.0% 26.7%
US platinum <PLN1> 1796.80 9.80 0.5% 1.0%
US palladium <PAM1> 793.10 8.70 1.1% -1.3%
Gold <XAU=> 1452.31 15.76 1.1% 2.3%
Silver <XAG=> 39.12 0.70 1.8% 26.8%
Platinum <XPT=> 1786.99 7.54 0.4% 1.1%
Palladium <XPD=> 786.22 6.72 0.9% -1.7%
Gold Fix <XAUFIX=> 1433.50 -1.00 -0.1% 1.6%
Silver Fix <XAGFIX=> 38.08 -38.00 -1.0% 24.3%
Platinum Fix <XPTFIX=> 1787.00 1.00 0.1% 3.2%
Palladium Fix <XPDFIX=> 780.00 5.00 0.6% -1.4%
(Additional reporting by Jan Harvey and Silvia Antonioli in
London; Editing by David Gregorio)
