Gold Rises on Speculation Oil Prices May Accelerate Inflation

May 25 -- Gold rose in London after talks to persuade Iran to stop uranium enrichment ended inconclusively, sending oil prices higher and stoking speculation that inflation will accelerate.

Crude rose above $70 a barrel today after Iranian President Mahmoud Ahmadinejad said yesterday his country has the right to develop atomic energy and any aggressors trying to stop it would get ``a lasting and historic slap.'' Iran is the world's fourth- largest oil producer. Gold rose to a record $850 an ounce in January 1980 when the 1979 Iranian revolution cut oil exports.

``We are looking for prices to go up amid concerns about security and oil prices,'' said Ali Alwash, a Geneva-based trader at MKS Finance SA, a precious metals-trading and refining company. ``The geopolitical situation could be aggravated.'' Gold may trade between $635 and $665 during the next 10 days, Alwash said.

Gold for immediate delivery rose as much as $7.04, or 1.1 percent, to $647.74 an ounce in London. The metal was $6.35 higher at $647.05 at 12:18 p.m. London time, taking its gains this year to 24 percent. Gold for June delivery climbed $9.50, or 1.5 percent, to $647 an ounce on the Comex division of the New York Mercantile Exchange.

Iran is under increasing pressure from the U.S. and Europe to abandon its nuclear program. The United Nations Security Council's five permanent members -- France, China, Russia, the U.K. and the U.S. -- plus Germany met in London yesterday to discuss trade and technology incentives offered by the three European nations to encourage Iran to stop enriching uranium.

Silver Investment

Iran may be able to produce a nuclear bomb by 2010, the International Institute of Strategic Studies said yesterday.

Investment in Barclays' iShares Silver Trust yesterday fell for first time since it started trading April 28. Silver held by the fund fell 2.5 million tons to 70.5 million tons, according to data from the company.

UBS AG analyst John Reade says he remains positive about the outlook for the ETF.

Still, ``for the ETF to attract new inflows, metals need to stop falling,'' he said in a report today.

Silver for immediate delivery rose 19 cents, or 0.8 percent, to $12.61 an ounce. Platinum gained $5.50, or 0.4 percent, to $1,289.50 an ounce. Palladium was unchanged at $346.50 an ounce.