Gold rose to a record in New York and London as concern about faster inflation and a weakening dollar boosted demand for the metal as an alternative investment. Silver touched a 31-year high.

Consumer prices in China, the world’s fastest growing major economy, rose 5.4 percent in March, the quickest pace since 2008, exceeding the government’s 2011 target for a third month. European inflation accelerated more than previously estimated last month. Gold, which has climbed in the past decade, gained this year as the dollar weakened and on concerns about Japan’s nuclear disaster, fighting in Libya and European debt.

Inflation concerns “have brought in another bit of interest” to gold, Afshin Nabavi, a senior vice president at MKS Finance SA, a bullion refiner in Geneva, said today by phone. “Obviously all the geopolitical problems” and a weakening dollar have supported prices, he said.

Gold futures for June delivery gained as much as $8.10, or 0.6 percent, to $1,480.50 an ounce and traded at $1,477.50 at 8 a.m. on the Comex in New York. The metal for immediate delivery in London was 0.2 percent higher at $1,476.65 an ounce after reaching a record $1,479.35.

The U.S. Dollar Index, a six-currency gauge of the greenback’s value, was little changed after yesterday falling to a 16-month low. Bullion typically moves inversely to the dollar. Fourteen of 18 traders, investors and analysts surveyed by Bloomberg, or 78 percent, said bullion will rise next week. Three predicted lower prices and one was neutral.

Best Performer

Silver for May delivery in New York climbed as much as 2.5 percent to $42.715 an ounce, the highest price since January 1980, the year futures reached a record $50.35. The metal was last up 2 percent at $42.515 and has surged 37 percent in 2011. It’s the best performer this year among the 24 commodities tracked by the Standard & Poor’s GSCI spot index.

Silver held in exchange-traded products slipped 242.82 metric tons to 15,238.7 tons yesterday, data compiled by Bloomberg from four providers show. That’s the biggest slide since at least February 2010.

An ounce of gold bought as little as 34.62 ounces of silver today, the least since September 1983, data compiled by Bloomberg show.

Faster Inflation

China’s central bank has raised rates four times since October to combat accelerating prices. Billionaire investor George Soros, chairman of Soros Fund Management LLC, said on April 10 that inflation in China was “somewhat out of control.” Inflation in the 17-nation euro region quickened to 2.7 percent from 2.4 percent in February, the European Union’s statistics office said today. That’s above an initial March estimate of 2.6 percent and the fastest since October 2008.

“Inflation is the key word to investors,” said Park Jong Beom, a Seoul-based trader at Tongyang Futures Co. “Gold will test $1,500 next week.”

The limitations of the North Atlantic Treaty Organization’s air campaign in Libya have become evident as a seven-week rebel drive to push Muammar Qaddafi from power has ground to a standstill. A request by NATO’s chief for more ground attack aircraft was rejected by the U.S. and France.

Ireland’s credit rating was cut two levels by Moody’s Investors Service to the lowest investment grade as the government struggles to lower the budget deficit and restore economic growth. Prime Minister George Papandreou said Greece, which came close to defaulting on its debt last year, won’t need to restructure its debt as he opened a Cabinet meeting to present measures aimed at achieving deficit-reduction goals.

Palladium for June delivery was down 0.2 percent at $772.65 an ounce. Platinum for July delivery was little changed at $1,795.40 an ounce.

To contact the reporters on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net

To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net

Source: http://www.bloomberg.com/news/2011-04-15/gold-surges-to-record-as-global-inflation-concern-stokes-demand.html