Gold Rises on Higher Oil After Gustav Cuts U.S. Gulf Production

By Glenys Sim

Sept. 1 (Bloomberg) -- Gold climbed on higher energy prices as Hurricane Gustav halted most U.S. oil and natural gas production and refining, boosting the precious metal's appeal as an inflation hedge.

Bullion also rose as the dollar declined against the euro and yen on concern a rise in oil prices will harm the economic outlook. Energy producers have shut more than 96 percent of offshore oil output and 82 percent of gas production in the Gulf of Mexico because of the hurricane.

``Gold is still in a consolidatory phase and will continue to take cues from oil and the dollar,'' said Zhu Bin, head of research at Nanhua Futures Co. in Hangzhou.

Bullion for immediate delivery gained as much as $5.35, or 0.6 percent, to $836.50 an ounce, and traded at $831.30 an ounce at 8:53 a.m. in Singapore. Silver for immediate delivery rose 0.8 percent to $13.6925 an ounce.

Eleven of 25 traders, investors and analysts surveyed from Mumbai to Chicago, said gold may rise for a third straight week on speculation that higher energy costs will boost demand for the precious metal as a hedge against accelerating consumer prices. Ten said to sell, and four were neutral.

Gold for December delivery was little changed at $835.70 an ounce in after-hours electronic trading on the Comex division of the New York Mercantile Exchange at 9:09 a.m. in Singapore. The U.S. markets are closed today for the Labor Day holiday.

Gold for June delivery on the Tokyo Commodity Exchange fell 1.1 percent to 2,913 yen a gram ($836 an ounce).

To contact the reporter on this story: Glenys Sim in Singapore at gsim4@bloomberg.net