Gold May Drop on Sales After Rally to Record; Silver Reaches 31-Year High

Gold may decline in New York as some investors sell the metal following its rally to a record and after the African Union said Libyan leader Muammar Qaddafi agreed to a cease-fire. Silver reached a 31-year high.

Libya’s rebels said a plan proposed by the African Union and agreed to by Qaddafi won’t be acceptable if it allows the ruler and his sons to retain power. Germany warned that deficit- scarred Greece might need more financial relief as Portugal seeks an 80 billion-euro ($116 billion) aid package. U.S. reports this week may show inflation is quickening, economists said.

“Profit-taking has emerged” and “a further pullback could be seen” on news that Qaddafi accepted a peace proposal, James Moore, an analyst at TheBullionDesk.com in London, said in a report to clients today. Still, “ongoing concerns of European Union debt, low interest rates and ongoing inflation concerns are bullish” for gold, he said.

Gold futures for June delivery fell $3.10, or 0.2 percent, to $1,471 an ounce at 7:59 a.m. on the Comex in New York. Prices earlier today gained as much as 0.3 percent to an all-time high of $1,478. The metal for immediate delivery in London was down 0.3 percent at $1,470.05 after reaching a record $1,478.18.

Bullion was unchanged at $1,469.50 an ounce in the morning “fixing” in London, used by some mining companies to sell output, from the afternoon fixing on April 8.

Inflation Expectations

The difference between yields on U.S. 10-year notes and Treasury Inflation Protected Securities, a gauge of traders’ expectations for inflation, widened to as much as 2.66 percentage points, the most since March 2008. Reports this week may show U.S. consumer prices rose 0.5 percent last month from February, and wholesale prices and the cost of goods imported into the U.S. climbed, according to Bloomberg surveys of economists.

After almost two months of fighting, Libyan rebels and troops loyal to Qaddafi have fought to a stalemate. Qaddafi agreed to accept a peace plan that called for a cease-fire with rebels, theAfrican Union said. There was no mention of Qaddafi agreeing to step down.

Gold held in exchange-traded products rose 19.98 metric tons to 2,049.15 tons on April 8, the highest level since Jan. 24, data compiled by Bloomberg from 10 providers show. UBS AG today raised its one-month bullion forecast to $1,500, from $1,450.

Silver Gains

Silver for May delivery in New York climbed as much as 3.4 percent to $41.975 an ounce, the highest level since January 1980, when futures reached a record $50.35. It last traded at $41.33. An ounce of gold bought as little as 35.16 ounces of silver in London today, the least since September 1983, data compiled by Bloomberg show.

“We continue to believe that silver will reach $50, based nearly exclusively on speculator activity,” Edel Tully, a UBS analyst in London, said today in a report to clients. “Silver could surge to $45 this week, before very quickly surrendering double-digit percentage gains. It takes a brave investor to buy silver right now.”

Silver ETP holdings gained 30.36 tons to 15,453.45 tons on April 8, the highest level since at least February last year, data from four providers show.

Palladium for June delivery was little changed at $795 an ounce after touching a one-month high of $805.25. Platinum for July delivery declined 0.4 percent to $1,804.90 an ounce.

(Source: http://www.bloomberg.com/news/2011-04-11/gold-may-slide-on-sales-after-rally-to-record-silver-reaches-31-year-high.html)