Gold Gains on Crude Oil Record

Gold futures gained 2 percent on Wednesday as crude oil soared to a new record while a weaker U.S. dollar boosted investors demand for the precious metal.

London-based consultancy group GFMS Ltd. said the price of gold can very well rise to a record $1,200 this year on demand for a hedge against credit-market turmoil, while output by mining companies is lower than consumption levels.

Gold for June delivery soared $19.50 to finish at $937.50 an ounce on the Comex division on the New York Mercantile Exchange.

Gold's price shot up as investors sought an inflation hedge after crude-oil futures rallied nearly $4 Wednesday to a new record of $112.21 a barrel after government data said crude supplies dropped by 3.2 million barrels during the week ended April 4.

The backdrop of economic fears in the U.S., energy-related inflationary pressures and ongoing credit issues continues to draw investment interest from those looking longer term, said James Moore, an analyst at TheBullionDesk.com, in a research note.

The dollar index, which tracks the performance of the greenback against a basket of currencies, dipped 0.7 percent to 71.79.

The dollar continued to drop against the yen and euro as stocks tumbled on Wall Street and investors awaited a policy decision from the European Central Bank. Investors and analysts expect the ECB to hold its key rate steady at 4 percent.

Gold may rise to a record $1,200 this year on demand for a hedge against credit-market turmoil, while output by mining companies trails consumption, London-based researcher GFMS Ltd. said today in a report.

We're looking at a peak of $1,100 to $1,200,'' GFMS Executive Chairman Philip Klapwijk said. It's more likely that 2009 rather than 2008 will be the peak for gold.''

Also on the Nymex, May silver futures gained 49 cents to close at $18.20 an ounce and July platinum futures added $15 at $2,044.60 an ounce. May copper futures rose 11 cents to end at $4.0 a pound. June palladium increased $5.80 at $463.20 an ounce.