Gold Futures Rise to Seven-Week High as Oil Prices Rebound

Gold in New York climbed to the highest in seven weeks as rebounding oil prices boosted the appeal of precious metals as a hedge against inflation.

Gold sometimes moves together with oil, which erased losses today after gaining 4.7 percent yesterday, the most since September 2005. Oil prices have more than doubled from five years ago. Gold reached a 26-year high in May as oil reached a record in July.

"Gold will tend to run with crude oil,'' said Matthew Zeman, a precious metals trader at LaSalle Futures Group in Chicago. "If you get a nice reversal in crude, gold is going to follow suit.''

Gold futures for February delivery rose $2.30 or 0.4 percent to $648.20 an ounce on the Comex division of the New York Mercantile Exchange, the highest closing price since Dec. 4 for a most-active contract. Prices rose 1.9 percent yesterday.

Oil prices yesterday had the biggest one-day gain since hurricanes devastated the Gulf of Mexico coast after the U.S. said it will double the size of the nation's Strategic Petroleum Reserve. Prices are 19 percent lower than a year ago.

Investment demand for gold may grow as exchange-traded funds become more popular, analysts say. So-called ETFs linked to the price of the metal that trade in New York, London, Singapore, Mexico and France have already attracted a combined $11 billion since the first was introduced in November 2004.