* Gold rises 2 percent on safe-haven play, Egypt unrest
* Dollar, U.S. Treasuries, crude oil rally; stocks down
* Coming up: U.S. December personal income on Monday
(Recasts, updates with new details throughout story)
By Frank Tang
NEW YORK, Jan 28 (Reuters) - Gold posted its biggest gains
in eight weeks on Friday, gaining nearly 2 percent as the
prospect of unrest in Egypt spreading across the Middle East
fueled a rush of safe-haven buying in the financial markets.
The nearly $40-an-ounce jump in active trading revived
investor interest in bullion, which is still set for its first
monthly decline in half a year after investors fled the market
on signs that the Euro zone debt crisis was receding and the
U.S. economy was on a firmer recovery footing.
After several days of unprecedented protests, the sight of
armored cars in the streets of Cairo on Friday finally got the
attention of global markets. Oil spiked by more than 4 percent,
the dollar rose sharply and Treasuries gained as investors
feared the political instability could spread.
"Confusion breeds contempt for all investments other than
gold. Clearly, money is flowing to gold as the ultimate safe
haven ... because nobody knows how this situation is going to
resolve itself," said Dennis Gartman, publisher of the Gartman
Letter, a daily investment commentary.
Gartman, a long-time gold bull who liquidated some of his
position this month, said he did not expect Egypt's unrest to
be over anytime soon and that gold could further benefit from
the possibility of chaos spreading to other countries in the
region.
Spot gold <XAU=> rose 2 percent to $1,338.39 an ounce by
2:43 p.m. EST (1943 GMT), the largest one-day gain since early
December. That reversed Thursday's 2.6 percent slump as a run
of better-than-expected economic data fueled concern over
higher interest rates that could end gold's long bull run.
Earlier in the session, gold touched a four-month low of
$1,308.00 an ounce.
U.S. gold futures for February delivery <GCG1> settled up
$22.3 at $1,340.70 an ounce, with total volume topping 300,000
lots for a second day running, the highest since November.
Spot silver <XAG=> rose 3.5 percent to $27.82 an ounce.
Despite Friday's rally, gold notched a four-week losing
streak, its longest consecutive weekly decline in a year.
After the toppling of Tunisia's president earlier this
month, financial markets are even more on edge over growing
instability in the Middle East as Egyptian President Hosni
Mubarak attempts to quell street fighting and mass protests
demanding an end to his 30-year rule. []
"The market is a little sensitive when people take to the
streets as it reminds them of the riots in Greece a year ago,
and that did lead to a flight into the safety of U.S.
Treasuries," said Chris Rupkey, chief financial economist at
Bank of Tokyo/Mitsubishi UFJ in New York.
The dollar index <.DXY> rose 0.5 percent and U.S.
Treasuries climbed. Stocks fell around the world while many
other key commodities gained, led by oil which jumped to nearly
$100 a barrel in London. []
INVESTOR EXODUS
Gold initially weakened after data showed the U.S. economy
gathered speed in the fourth quarter with the biggest gain in
consumer spending in more than four years. []
Latest trade data by the Commodity Futures Trading
Commission (CFTC) showed that open interest, a gauge of market
liquidity, sank 14 percent to just above 500,000 lots as
speculators cut their net longs or bullish positions for a
third week. []
Open interest fell sharply after hedge fund SHK Asset
Management liquidated a U.S. gold futures position this week
valued at over $850 million, more than 10 percent of the main
U.S. futures market, the Wall Street Journal reported.
[]
Investment demand for gold has been soft this year, with
holdings of the SPDR Gold Trust <GLD>, the world's largest
gold-backed exchange-traded fund, down another 3 tonnes on
Thursday.
Holdings of the world's largest silver-backed ETF, the
iShares Silver Trust <SLV>, also fell on Thursday.
Some analysts said the confluence of selling from gold and
silver ETFs and futures showed the characteristics of
capitulation, and prices should rebound after a large number of
investors exited their bullish positions.
Gartman said liquidation pressure in gold had run its
course after spot prices bounced off key support near their
150-day average in overnight trade.
Platinum <XPT=> climbed 0.7 percent to $1,793.50 an ounce
and palladium <XPD=> gained 1.1 percent to $810.72.
Prices at 2:48 p.m. EST (1948 GMT)
LAST/ NET PCT YTD
CLOSE CHG CHG CHG
US gold <GCG1> 1340.70 22.30 1.7% -5.7%
US silver <SIH1> 27.919 0.888 0.0% -9.8%
US platinum <PLJ1> 1800.10 6.30 0.4% 1.2%
US palladium <PAH1> 817.00 3.50 0.4% 1.7%
Gold <XAU=> 1336.95 24.71 1.9% -5.8%
Silver <XAG=> 27.78 0.90 3.3% -10.0%
Platinum <XPT=> 1793.03 12.03 0.6% 1.4%
Palladium <XPD=> 810.72 8.50 1.1% 1.4%
Gold Fix <XAUFIX=> 1319.00 3.00 0.2% -6.5%
Silver Fix <XAGFIX=> 26.68 -71.00 -2.6% -12.9%
Platinum Fix <XPTFIX=> 1784.00 6.00 0.3% 3.1%
Palladium Fix <XPDFIX=> 806.00 3.00 0.4% 1.9%
(Additional reporting by Al Yoon in New York and Jan Harvey in
London; Editing by Dale Hudson and Jim Marshall)
