April 20, 2010, 12:10 PM EDT

By Claudia Carpenter and Pham-Duy Nguyen

April 20 (Bloomberg) -- Gold futures rose for the first time in three sessions on speculation that signs of inflation will revive demand for the metal. Palladium extended a rally to the highest level since March 2008.

India raised interest rates for the second time in a month to tame rising consumer prices, and the U.K.’s inflation rate in March jumped more than economists forecast. The metal dropped 2.1 percent in the past two sessions as a U.S. government lawsuit against Goldman Sachs Group Inc. curbed demand for commodities.

“If inflation begins to creep back, that’s a good environment for gold,” said Martyn Whitehead, the head of metal sales at Barclays Capital in London.

Gold futures for June delivery advanced $4.30, or 0.4 percent, to $1,140.10 an ounce at 12:04 p.m. on the Comex in New York. Yesterday, the price touched $1,124.30, the lowest level since April 6.

India, the world’s largest buyer of gold for jewelry, has inflation of almost 15 percent. In the U.K., consumer prices last month climbed 3.4 percent from a year earlier, compared with a 3 percent increase in February.

In the U.S., the Federal Reserve has kept its benchmark interest rate at zero percent to 0.25 percent since December 2008 to revive the economy.

“Accommodative policy that remains in place will support gold prices due both to inflation fears and its attraction of safe-haven inflows due to competition with low-yielding credit instruments,” said Tom Pawlicki, an analyst at MF Global Holdings Inc. in Chicago.

Palladium futures for June delivery climbed $16.80, or 3.1 percent, to $550.50 an ounce on the New York Mercantile Exchange. Earlier, the price reached $554.75, the highest level for a most-active contract since March 6, 2008.

Platinum futures for July delivery rose $22.50, or 1.3 percent, to $1,719.10 an ounce.

Silver futures for May delivery increased 18.4 cents, or 1 percent, to $17.915 an ounce on the Comex.

--Editors: Patrick McKiernan

To contact the reporters on this story: Claudia Carpenter in London at ccarpenter2@bloomberg.net; Pham-Duy Nguyen in Seattle at pnguyen@bloomberg.net.

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net

http://www.businessweek.com/news/2010-04-20/gold-rises-for-first-time-in-three-days-on-inflation-concerns.html