Gold futures rose for the second straight day on demand for the precious metal as an alternative to stocks and government bonds. Silver also gained. US unemployment in February surged to 8.1 percent, the highest in 25 years. Global equities headed for the fourth straight weekly decline. US Treasuries are down 2.5 percent this year through yesterday. Gold has gained 6.6 percent in 2009.

“Too much slowing and too much uncertainty brought back longs to the gold market,” said Tom Hartmann, a commodity analyst at AltaVest Worldwide Trading Inc. in Mission Viejo, California. Gold futures for April delivery rose $14.90, or 1.6 percent, to $942.70 an ounce on the Comex division of the New York Mercantile Exchange. Yesterday, the price climbed 2.3 percent, halting an eight-session slide. The metal was little changed this week.

The Standard & Poor's 500 Index is down more than 8 percent this week, and the MSCI World Index has dropped 21 percent in the past month. Gold rallied 5.5 percent last year when the S&P lost 38 percent. Treasuries returned 14 percent in 2008, according to Merrill Lynch & Co. bond indexes.

'Lack of confidence'
“Gold is being driven by concern about the financial system and lack of confidence in paper currencies,” said Adrian Day, the president of Adrian Day's Asset Management in Annapolis, Maryland. “All the pressure is on the upside.” The Bank of England yesterday cut its benchmark rate to 0.5 percent, the lowest ever. 

The European Central Bank cut its main rate to 1.5 percent, and the federal-funds rate is zero to 0.25 percent. Gold priced in euros and pounds reached a record last month. Gold futures reached an all-time high of $1,033.90 for March 17. Still, gold's gains may be limited should the dollar climb, some analysts said.

As a hedge against declines in the US currency, gold generally moves in the opposite direction of the dollar. The metal and the greenback have moved in tandem this year as investors sought a haven from financial-market turmoil.

“The gold price requires fresh ETF inflows in order to offset vulnerability in a strengthening dollar environment,” Deutsche Bank AG analysts said in a report. Investment in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, has remained unchanged at a record high of 1,029.3 metric tons since February 26.

The author is a Bloomberg News columnist. The opinions expressed are his own

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