* Bullion retains gains even after dollar pares losses
* Silver surges toward highs; gold ratio at 46-month low
* Dollar recoups losses, setting aside poor economic data
(Updates prices throughout)
By Jonathan Leff
NEW YORK, Dec 28 (Reuters) - Gold prices jumped over 1.5
percent and silver streaked toward a 30-year high on Tuesday,
as thin volume and bullish hopes for next year drove bullion
above $1,400 an ounce for the first time in two weeks.
Precious metals held their gains to trade at the day's
highs even after the U.S. dollar reversed deep early losses.
Data showing an unexpected deterioration in U.S. consumer
confidence and a sharp fall in U.S. single-family home sales
fed gold's rise as the dollar gyrated. []
"There's a little year-end rush to see if we can post some
high numbers to mark the books against," said Fred Schoenstein,
a trader at Heraeus Precious Metals Management in New York.
"Volumes are very low so it doesn't take a lot to push it."
A sharp rise in U.S. Treasury yields after dismal demand at
an auction of five-year notes may have also fuelled inflation
concerns that added to gold's allure. []
After several weeks of trendless trade, gold staged its
biggest one-day gain since Dec. 3 as many investors bet that
economic uncertainty and currency diversity would fuel more
demand from investors and banks. Prices are on track to rise 28
percent this year, a record 10th consecutive annual gain.
After modest early gains, spot gold <XAU=> shot more than
$20 an ounce higher in early U.S. trade, closing up 1.57
percent at $1,406.75 an ounce, near the day's high.
U.S. gold futures for February delivery <GCG1> rose 1.64
percent, or $22.70, to $1,405.60. Trading volume picked up from
Monday's lackluster activity, with over 106,000 lots, still
only about half the norm. Volumes were subdued by a British
holiday and lack of official gold fixings.
Silver led the rally as it has for the past few months,
with traders rushing to clamber on board one of the
best-performing commodities this year.
After pacing gold earlier, spot silver <XAG=> shot ahead,
jumping 3.4 percent to $30.26 an ounce, nearing the 30-year
high of $30.68 touched on Dec. 7. Prices have surged nearly 80
percent this year versus gold's 28 percent rise.
The gold-silver ratio, used to measure how many ounces of
silver is used to buy an ounce of gold, slumped to a new
46-month low of 46.4, extending its steady decline since
August. It has averaged about 63 over the past year, and
dropped below 45 only twice in the past 25 years.
(Graphic: http://link.reuters.com/xuv83r)
"I don't think it's unrealistic to see silver make a shot
for $30.50 or $30.75 before the end of the year. But gold, I'd
be very surprised to see it back to its highs," said
Schoenstein. He added that the precious metals could yet
succumb to year-end profit-taking later this week.
The dollar gyrated through the session, setting a record
low against the Swiss franc and hitting a 6-1/2-week low
against the yen after Japan reported its factory output rose in
November for the first time in six months. The dollar index
<.DXY> closed fractionally higher on the day. []
The latest set of indicators appeared to paint a more
downbeat picture of the U.S. economy, at odds with other recent
signs showing the recovery is accelerating and boosting demand
for gold as a shelter from uncertainty.
The Conference Board, an industry group, said its index of
consumer attitudes slipped to 52.5 in December from an upwardly
revised 54.3 in November. The Standard & Poor's/Case-Shiller
composite housing index of 20 metropolitan areas declined 1
percent in October from September. []
GARTMAN ADDS
Independent investor Dennis Gartman, at times cautious on
gold's rally this year, said he was now expanding his position
by buying bullion in U.S. dollar terms as central banks stock
up. []
"We are long of gold in non-U.S. dollar terms, and now we
wish to add to the position by buying gold in U.S. dollar
terms," he said in his daily Gartman Letter.
"This is consistent with our thesis that gold is, at the
margin, becoming a reservable asset of greater interest by the
reserve banks of Asia, Africa and likely also South America. At
the margin, they are increasing their gold holdings at the
expense firstly of the EUR (euro) and now of dollars."
Next year is expected to mark the end of a lengthy trend of
official sector bullion sales, with central banks globally
turning net buyers for the first time in decades. Investors are
also expected to continue piling in.
Spot gold <XAU=> is biased to rise to $1,410 per ounce as
an upward wave "c" is unfolding towards an eventual target at
$1,430, said Wang Tao, a Reuters market analyst. (For a graphic
on the outlook see: http://link.reuters.com/wet83r)
"Asians have been non-stop buyers, and want to load up when
gold is some 40 bucks off the all-time highs," a
Singapore-based trader said.
Prices at 5:21 p.m. EST (2221 GMT)
LAST/ NET PCT YTD
CLOSE CHG CHG CHG
US gold <GCG1> 1405.60 22.70 1.6% 28.2%
US silver <SIH1> 30.323 1.068 0.0% 80.0%
US platinum <PLF1> 1751.70 16.20 0.9% 19.1%
US palladium <PAH1> 787.20 20.10 2.6% 92.5%
Gold <XAU=> 1404.15 -1.35 -0.1% 28.1%
Silver <XAG=> 30.25 -0.01 0.0% 79.6%
Platinum <XPT=> 1750.00 -3.24 -0.2% 19.4%
Palladium <XPD=> 785.00 -0.22 0.0% 93.6%
(Editing by Dale Hudson)
