Gold Rises in London on Concern Oil Gains Will Spark Inflation

May 19 (Bloomberg) -- Gold rose in London for the first day in three as investors bought bullion as a hedge against rising energy prices.

Crude oil rose for a second day in New York before the peak driving season in the U.S. that starts at the end of this month. Oil has gained 14 percent this year, stoking inflation. The U.S. Labor Department reported on May 17 consumer prices are rising at an annual rate of 5.1 percent in January through April, compared with a 4.6 percent pace in the same four months last year.

``There is continuing strong demand for the metal, particularly in Asia,'' said John Meyer, an analyst at Numis Securities in London. ``There are inflation fears, and gold is seen as a hedge against inflation.''

Gold for immediate delivery rose $2.10, or 0.3 percent, to $684.40 an ounce at 9:29 a.m. in London. The metal has dropped 4.3 percent this week, heading for its first weekly drop in ten.

Lower prices spurred consumers to buy the metal.

``There's Asian demand for gold whenever there's a dip in prices,'' said Jonathan Barratt, head of foreign exchange and precious metals at Tricom Futures Pty., in Sydney.

Platinum rose $9.50, or 0.7 percent, to $1,312 an ounce. Silver gained 11 cents, or 0.9 percent, to $12.78 an ounce.