August 30th, 2011

Gold futures rose in New York on speculation that the Federal Reserve will ease monetary policy further to stimulate the economy, boosting the appeal of the precious metal as an alternative asset.

“We need to do more,” Chicago Fed President Charles Evans said today in a CNBC interview. The Standard & Poor’s 500 Index fell after a report showed confidence among U.S. consumers plunged in August to the lowest in almost two years. Gold has rallied 12 percent this month, touching a record $1,917.90 an ounce on Aug. 23.

“Classic flight-to-safety instruments are getting a bid today,” Adam Klopfenstein, a senior market strategist at MF Global in Chicago, said today in a telephone interview. “The inverse correlation between equities and gold will persist. Liquidity measures put the inflationary card in the picture. It’s the perfect storm to be long gold.”

Gold futures for December delivery gained $38.20, or 2.1 percent, to $1,829.80 at 11:09 a.m. on the Comex in New York.

Gold bullion is in the 11th year of a bull market, the longest winning streak since at least 1920 in London, as investors seek to diversify away from equities and some currencies. The metal is up 28 percent this year, outperforming global stocks, commodities and Treasuries.

The Fed has kept borrowing costs at a record low since December 2008 to stimulate the economy. Residential real-estate prices fell 4.5 percent from June 2010, according to the S&P/Case-Shiller index of property values released today.

No Immediate Stimulus

Federal Reserve Chairman Ben S. Bernanke refrained from announcing additional stimulus last week at a meeting of central bankers in Jackson Hole, Wyoming.

Gold is not a “safe harbor,” Dennis Gartman, an economist and the editor of the Suffolk, Virginia-based Gartman Letter, said in a report to clients.

“This is hardly a place for frightened capital to flee to,” Gartman wrote. “This is a place where only risk capital should be deployed.”

Prices had a trading range of more than $300 this month. The metal’s 10-day historical volatility is at 41 percent, the highest since March 2009.

Silver futures for December delivery rose 91.9 cents, or 2.3 percent, to $41.52 an ounce on the Comex.

On the New York Mercantile Exchange, platinum futures for October delivery advanced $22, or 1.2 percent, to $1,847 an ounce, while palladium futures for December delivery gained $11.85, or 1.6 percent, to $767.60 an ounce.

- Pham-Duy Nguyen in Seattle at Bloomberg.