Gold Steady in London, Paring Earlier Loss as Inflation Rises

By Marianne Stigset

July 16 (Bloomberg) -- Gold was little changed in London, paring earlier losses as U.S. consumer prices jumped the most since 2005, boosting the appeal of the metal as a hedge against inflation.

Prices paid by consumers gained on higher costs for fuel and food, the U.S. Labor Department said today. The cost of living soared 1.1 percent in June, after a 0.6 percent gain in May. Federal Reserve Chairman Ben S. Bernanke yesterday said risks to growth and inflation have risen.

``Those figures overall were supportive for gold,'' Narayan Gopalakrishnan, a Geneva-based trader at MKS Finance, one of Switzerland's four bullion refiners, said by phone from Geneva. ``We're not seeing a consolidation as much as a brief respite,''

Gold for immediate delivery traded 15 cents lower at $977.35 an ounce as of 2:39 p.m. in London, after earlier declining as much as 0.8 percent. Futures for August delivery dropped 60 cents, or 0.1 percent, to $978.11 an ounce on the Comex division of the New York Mercantile Exchange.

Harmony Gold Mining Co. and Gold Fields Ltd.'s mining operations in South Africa's Free State province were closed by a one-day strike over power prices. South Africa is the world's the second-biggest gold producer.

ETF Securities Ltd. said investors added $265 million to its exchange-traded gold products yesterday. U.S. financial shares fell to the lowest in a decade yesterday on speculation a shortage of capital will cause some banks to collapse.

``Gold is a safe-haven asset and the only asset class that is not someone else's liability and this is why it is thriving in the current environment,'' Mark O'Byrne, managing director of brokerage Gold and Silver Investments Ltd., said in a report.

Mining Fixing

Gold fell to $974 an ounce in the morning ``fixing'' in London, used by some mining companies to sell production, from $986 at the previous afternoon fixing.

Silver for immediate delivery rose 10 cents, or 0.5 percent, to $19.02 an ounce in London.

Hochschild Mining Ltd., Peru's second-largest silver producer, said second-quarter output rose 24 percent. The company remains ``very bullish'' on gold and silver prices as investors seek refuge during ``difficult economic times,'' Chief Executive Officer Miguel Aramburu said.

Among other metals for immediate delivery, platinum dropped $29.50, or 1.5 percent, to $1,950 an ounce. Palladium declined $8.50, or 1.9 percent, to $436.75 an ounce.

To contact the reporter on this story: Marianne Stigset in Oslo at mstigset@bloomberg.net