* Dollar weakness, inflation expectations lift gold
* SPDR gold ETF reports further outflow on Friday
* Platinum reaches 16-month high
(Updates prices, adds comment)
By Jan Harvey
LONDON, Jan 11 (Reuters) - Gold prices rose 2 percent in
Europe on Monday to a five-week high of $1,161.50, benefiting
from weakness in the dollar as traders bet on U.S. interest
rates staying low in the immediate future.
Spot gold <XAU=> was bid at $1,154.35 an ounce at 1425 GMT,
against $1,137.90 late in New York on Friday. U.S. gold futures
for February delivery <GCG0> on the COMEX division of the New
York Mercantile Exchange rose $16.50 to $1,155.40 an ounce.
The metal is building on gains made in the first trading
week of the new year, when prices climbed nearly 4 percent.
"The technical situation for gold improved last week," Peter
Fertig, a consultant at Quantitative Commodity Research, said.
"In addition of course, the U.S. dollar has given back some of
the gains it made at the end of last year."
"All in all I see further upside potential for gold. I still
expect during the first few months of the year we will hit new
record highs."
Gold hit a record high $1,226.10 an ounce in December.
The U.S. dollar fell on Monday after disappointing U.S. jobs
data on Friday and comments from a Federal Reserve official that
U.S. interest rates are likely to stay low for some time. []
Weakness in the U.S. unit boosts gold's appeal as an
alternative asset and makes dollar-priced commodities cheaper
for holders of other currencies.
Other commodities rose on the back of the dollar's decline,
with oil jumping more than 1 percent and base metals also
climbing. Industrial commodities are benefiting from
stronger-than-expected Chinese import data. [] []
Growth in China's imports and exports last month beat
expectations, providing fresh evidence of economic recovery. One
analyst said the trade data suggested December industrial output
grew by more than 25 percent year-on-year. []
"With the Chinese data out, people are expecting a faster
recovery in global growth, which could see some gold buying for
those who believe it is an inflation hedge," said Walter de Wet,
an analyst at Standard Bank.
OUTFLOW
In New York, the world's largest gold-backed exchange-traded
fund reported a near four-tonne outflow on Friday. []
Its holdings slipped just over 14 tonnes or 1 percent in the
first trading week of the new year, compared with a rise of more
than 7 tonnes in the same period of 2009.
Deutsche Bank said in a research note it expects inflows
into precious metals exchange-traded products (ETP) to slacken
this year as investors divert attention to more volatile
commodities.
"We don't expect extreme outflows from precious metals
ETPs," it said. "However, growth rates are likely to be slower
than 2009."
Among other precious metals, silver <XAG=> tracked gold
higher to $18.73 an ounce against $18.44. Platinum <XPT=> hit a
16-month high of $1,590.50 and was later at $1,586.50 against
$1,574.50, while palladium <XPD=> was at $425 against $425.50.
Both platinum and palladium have benefited from the launch
of the first U.S.-based ETPs backed by the metals on Friday.
"We think platinum is poised to substantially benefit from
increased investment demand given its already favourable
fundamental outlook," Morgan Stanley said in a note.
Platinum group metals traders will be closely eyeing news on
global car sales for clues on future demand for the autocatalyst
materials.
Industry figures released on Monday showed China's auto
sales surged past the United States to reach record levels in
2009, underscoring China's importance to the global auto
industry as the world's biggest market. []
(Editing by Sue Thomas)
