SYDNEY, Dec 31 (Reuters) - Gold rallied on Thursday, helped
by a weaker U.S. dollar, a factor that has helped propel gold
to a record high earlier this month and its ninth annual gain
in as many years.
The gain reversed a slide in bullion prices on Wednesday,
when investors ditched gold as the dollar <.DXY> advanced on
positive outlooks for U.S. business activity and housing.
With gold looking to end the year up by around a quarter,
investors will turn to the prospects for 2010, which are likely
to largely hinge on how quickly the U.S. Federal Reserve moves
to tighten monetary policy.
Eagle Mining analyst Keith Goode expects bullion to
continue to find support from investors unconvinced the U.S.
dollar was firmly on the mend.
"If you don't buy the dollar story, and a lot of people
don't, then gold remains a safe investment," Goode said.
He said gold was likely to trade between $1,200-$1,300 an
ounce into the start of 2010, then go higher.
In 2009, gold reasserted its reputation as a safe-harbour
investment when the U.S. dollar is put on the defensive,
attracting more investors than in previous crisis periods.
Gold bugs assert bullion's ascent will continue to outpace
deterioration in the dollar next year, noting the dollar is
down only 4 percent this year against a basket of major
currencies <.DXY> versus gold's 25 percent rise.
Others aren't so sure.
Key measures of safe haven demand for gold such as inflows
into Exchange Traded Funds (ETFs) have been weak in the last
two quarters, noted Sydney-based Resource Capital Research.
"We consider that there is a high degree of speculative
momentum buying behind gold's recent surge, and without support
from demand fundamentals the near-term risk for gold at the
moment remains very much on the downside," it said in a recent
report.
Gold's 2009 gains pale against some other commodities: oil
<CLc1> is heading for a 78 percent annual gain and copper's 142
percent rise seems to make it the one of the best performing of
major commodities this year.
Spot gold <XAU=> was quoted at $1,097.00 an ounce at 0535
GMT versus New York's notional close of $1,092.55, 10 percent
below a record of $1226.10 hit on Dec. 3.
A market holiday in Japan was contributing to light
volumes, which was boosting volatility.
U.S. February gold futures <GCG0> rose $6 to $1,098.50 an
ounce in electronic trading after settling down $5.60 at
$1,092.50 on the COMEX division of the New York Mercantile
Exchange.
The world's largest bullion-backed exchange-traded fund,
New York's SPDR Gold Trust <GLD>, reported an inflow of just
under one tonne on Tuesday. [].
Precious metals prices at 0621 GMT
Metal Last Change Pct chg YTD pct chg
Turnover
Spot Gold 1097.45 4.90 +0.45 24.69
Spot Silver 16.91 0.12 +0.71 49.38
Spot Platinum 1463.50 9.50 +0.65 57.03
Spot Palladium 392.50 1.50 +0.38 112.74
Euro/Dollar 1.4364
Dollar/Yen 92.43
(Reporting by Jim Regan; Editing by Michael Urquhart)
