Gold Futures Rise in New York on Iran Tensions

Feb. 27 (Bloomberg) -- Gold rebounded from its biggest decline in two weeks as investors stepped up demand for the precious metal as a haven amid concern that the sovereign-debt crisis in Europe and tension in the Middle East will worsen.

International Monetary Fund Managing Director Christine Lagarde said the world economy is “not out of the danger zone,” citing threats from fragile financial systems and rising oil prices. Oil has advanced 10 percent this year amid concern that sanctions against Iran’s nuclear program will disrupt crude supplies from the second-biggest producer in the Organization of Petroleum Exporting Countries.

“The IMF warning and the sentiment on Iran is leading to a flight to safety and quality,” Dennis Cajigas, a senior market strategist at Zaner Group in Chicago, said in a telephone interview.

Gold futures for April delivery rose 90 cents, or less than 0.1 percent, to $1,777.30 an ounce at 11:25 a.m. on the Comex in New York. Prices dropped 0.6 percent on Feb. 24, the most since Feb. 10, on signs of an improving U.S. economy. Before today, the metal was up 13 percent this year after a 10 percent increase in 2011, an 11th consecutive annual gain.

Holdings in bullion-backed exchange-traded products rose to a record 2,396.9 metric tons on Feb. 24, data compiled by Bloomberg show.

The dollar gained against the euro as Moody’s Investors Service said Greek default risk “remains high” after the nation formally asked investors to exchange their holdings of government debt for new securities last week.

John Paulson told investors Feb. 24 that his $1.2 billion Gold Fund, which fell 11 percent last year, will outperform his other strategies over five years, according to a person with knowledge of the matter. Paulson said the metal is the best hedge against currency debasement as countries inject money into their economies.

Silver futures for May delivery rose 0.6 percent to $35.625 an ounce on the Comex. It’s up 28 percent this year, making it the best-performing precious metal.

--Editors: Steve Stroth, Patrick McKiernan

To contact the reporters on this story: Joe Richter in New York at [email protected]; Nicholas Larkin in London at [email protected];

To contact the editor responsible for this story: Steve Stroth at [email protected]