Gold futures notch record high Copper rallies 2.7% as Japan disaster tagged at $309 billion

By Claudia Assis, MarketWatch

March 23, 2011, 2:33 p.m. EDT

SAN FRANCISCO (MarketWatch) — Gold futures settled at a record high on Wednesday as a rally for crude reinforced fears of inflation and investors remained concerned about the Middle East and North Africa and Japan.

Gold for April delivery /quotes/comstock/21e!f:gc\j11 (GCJ11 1,439, +11.50, +0.81%)  rose $10.40, or 0.7%, to $1,438 an ounce on the Comex division of the New York Mercantile Exchange.

That was enough to beat the previous record settlement of March 2, when gold closed at $1,437.70 an ounce.

“Instead of looking for a reason to buy gold, no one can find a reason not to buy gold,” said Adam Klopfenstein, a senior market strategist with Lind Waldock in Chicago.

Unrest in the Middle East and North Africa, the destruction in Japan, continuation of the U.S. Federal Reserve’s easing policy, and inflation are all working to support the metal, he added.

Gold is likely to challenge $1,500 sooner rather than later, especially if prices firm around $1,475 an ounce in the coming sessions, Klopfenstein said.

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Gold gained momentum as the session progressed, leaving behind tepid early gains to rally as crude oil also jumped.

Investors are worried about food and energy inflation on the back of rallying crude, said Charles Nedoss, a senior market strategist with Olympus Futures in Chicago.

Crude-oil futures topped $106 a barrel before moderating some of their gains on Wednesday, propelled by continued worries about the Middle East and North Africa.

At least six protesters were killed in southern Syria Wednesday, according to news reports. Israel responded to rockets fired from Gaza with airstrikes.

Airstrikes in Libya continued, but so did government-led sieges in eastern Libyan towns held by the opposition.

S&P 500 (1 YEAR)

In Japan, authorities warned they had detected radioactive iodine in Tokyo’s water supplies, and issued a warning saying infants in Tokyo and surrounding areas should not drink tap water.

Copper also rallied Wednesday, with May copper /quotes/comstock/21e!f1:hg\k11 (HGK11 443.85, +12.55, +2.91%)  adding 12 cents, or 2.7%, to $4.43 a pound. That was copper’s best settlement since March 4, and lifted shares of copper miners on the S&P 500 Index /quotes/comstock/21z!i1:in\x (SPX 1,298, +4.21, +0.33%)  

Stock of Freeport McMoRan Copper & Gold Inc. /quotes/comstock/13*!fcx/quotes/nls/fcx (FCX 54.93, +2.65, +5.06%)  rose 4.5%, while Newmont Mining Corp. /quotes/comstock/13*!nem/quotes/nls/nem (NEM 54.56, +1.39, +2.61%)  added 2.3%.

Estimates put the cost of Japan’s disaster at $309 billion. Copper has gained off and on amid expectations that rebuilding Japan will demand more of the metal, used extensively in electrical wiring in construction.

“There’s so much demand in Asia, even prior to Japan,” Olympus’s Nedoss said.
Supplies of copper are thought to be thin, and inventories at the London Metal Exchange have recently decreased.

Other metals tracked gold and copper higher, with silver for May delivery /quotes/comstock/21e!f1:si\k11 (SIK11 3,730, +103.10, +2.84%)  up 9 cents, or 2.6%, to $37.20 an ounce. That was a fresh 31-year high for silver.

Platinum and palladium showed more modest advances. April platinum /quotes/comstock/21n!f:pa\j11 (PAJ11 738.50, +13.55, +1.87%)  gained $20.60, or 1.2%, to $1,760 an ounce. June palladium /quotes/comstock/21n!f1:pa\m11 (PAM11 748.60, +10.75, +1.46%)  rose $11.45, or 1.6%, to $749.30 an ounce.

Claudia Assis is a San Francisco-based reporter for MarketWatch.