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Gold tops $1,450, silver above $39 as nervous money seeks refuge

April 5, 2011 |  3:08 pm

Gold and silver powered higher Tuesday as geopolitical worries continued to pile up, driving more investors and traders to buy the metals as havens against calamity.

Gold hit a new all-time high (unadjusted for inflation), rallying $19.60, or 1.4%, to close at $1,451.80 an ounce in New York futures trading.

Silver extended this year’s hot streak, rising 69 cents, or 1.8%, to $39.17 an ounce. Before adjusting for inflation, silver is at its highest since the infamous spike of late 1979 and early 1980, when the Hunt brothers briefly cornered the market.

Austrian Silver now is up 27% year to date to gold’s 2% gain. Both metals had sold off in January before rebounding.

Anyone looking for fearful headlines didn’t have to search far Tuesday. The operator of Japan's crippled Fukushima nuclear plant said that it found severe levels of radiation in seawater. Libyan government forces continued to battle rebels for control of the oil port of Brega. And Portuguese government bond yields soared for the 11th time in 12 trading sessions after the nation’s banks threatened to stop buying the securities, moving the country closer to a European Union bailout.

After regular futures trading ended, gold and silver rose further in electronic trading following the Federal Reserve’s release of the minutes from its last meeting. Fed officials debated whether to stick with their easy-money policies but ultimately opted to continue with their most controversial economic-stimulus plan, the program of buying Treasury bonds to pump money into the financial system.

Many Fed critics say its policies will eventually fuel a surge in inflation. Gold and silver have always been considered great hedges against that risk.

Gold rose as high as $1,458 in electronic trading Tuesday afternoon while silver rose to $39.34.

Adam Klopfenstein, a strategist at commodities trader Lind-Waldock in Chicago, said the metals also may be benefiting from fear that Republicans in Congress will force a government shutdown rather than raise the federal debt limit from the current $14.29 trillion. Treasury Secretary Timothy F. Geithner warned Monday that the limit could be reached by May 16. A shutdown could occur as early as Friday if an interim spending agreement isn't reached.

The U.S. stock market has shown remarkable resilience in recent weeks despite foreign and domestic geopolitical concerns. On Tuesday the Dow industrials slipped just 6.13 points to 12,393.90 after hitting a new 34-month high Monday.

“It seems like investors want to keep their equity exposure but they’re also rotating into asset classes that provide a hedge,” Klopfenstein said. U.S. Treasury bonds might normally provide a hedge, but the chance of a government shutdown is causing some investors to shy away from Treasuries, he said.

That is drawing more haven-seekers to gold and silver, he said.

-- Tom Petruno

Photo: The Austrian national mint's gold philharmonic coin. Credit: Lisi Niesner / Reuters

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