* Economic data benefits euro, lifting gold
* Crude oil, base metals prices also rise
* Palladium hits highest since July 2008, platinum rises
(Updates prices)
By Jan Harvey
LONDON, Jan 4 (Reuters) - Gold prices rose 2 percent in
Europe on Monday as the dollar turned lower against the euro
after positive economic data from the euro zone, and amid
speculation inflation may rise this year.
Strength in gold lifted other precious metals, with
palladium climbing above $420 an ounce to its highest since July
2008, and platinum hitting a one-month peak.
Spot gold <XAU=> hit a peak of $ 1,118.70 an ounce and was
bid at $1,117.70 an ounce at 1117 GMT, against $1,096.35 late in
New York on Friday.
Analysts said the outlook for the precious metal was bright
on speculation global monetary stimulus could lead to rising
inflation later in 2010, raising the appeal of gold against
currencies.
"Further upside in gold is expected, with all the
uncertainty still out there," said Calyon metals analyst Robin
Bhar. "Governments are still stimulating their economies and may
be forced to continue doing so going into the second half."
"That (could lead) to further devaluation of paper
currencies, and more importantly, it may now give rise to
inflation," he added. "We are seeing signs of that in the UK,
and more so in the emerging economies like China."
Gold is often bought as a hedge against inflation. It also
closely tracks the path of the dollar. Weakness in the U.S. unit
boosts gold's appeal as an alternative asset, and makes
dollar-priced commodities cheaper for other currency holders.
The euro reversed early losses to climb 0.5 percent against
the dollar as purchasing managers' surveys confirmed that euro
zone manufacturing activity expanded at its fastest rate in 21
months in December. [] []
Other commodities also rose. Oil climbed more than 2 percent
on news Russia has halted oil supplies to Belarus, and after a
cold snap in the United States. Base metals prices rose, with
copper hitting a 6-month high. [] []
Gold tends to track crude prices, as the metal can be bought
as a hedge against oil-led inflation.
U.S. gold futures for February delivery <GCG0> on the COMEX
division of the New York Mercantile Exchange rose $22.30 to
$1,118.50 an ounce.
RECOVERING DEMAND
On the physical market, buying of gold exchange-traded funds
was light at year-end, with the SPDR Gold Trust <GLD>, the
largest gold-backed ETF, reporting no change to its holdings on
Friday, the last day of 2009.
The SPDR's holdings rose 45 percent, or 353 tonnes, over
2009, it said. The amount of metal held to back the world's
largest silver ETF, the iShares Silver Trust <SLV>, climbed 40
percent or 2,700 tonnes in the same period, it said.
Some signs emerged of recovering physical demand in India,
the world's largest bullion consumer in 2008, after high prices
curbed buying for much of last year.
The Bombay Bullion Association said on Friday Indian gold
imports rose to a provisional 32-35 tonnes in December from 3
tonnes a year before. []
Indian gold traders continued to pick up bargains on Monday
as a firm rupee made the dollar-quoted yellow metal cheaper,
dealers said. []
Silver <XAG=> was at $17.15 an ounce against $16.84,
platinum <XPT=> at $1,496.50 against $1,465.50 and palladium
<XPD=> at $418.50 against $405.50. Earlier palladium hit a more
than 17-month high at $420.50.
Platinum group metals prices are benefiting from hopes for
an economic recovery in 2010, which is likely to boost demand,
and speculation platinum and palladium-backed exchange traded
products will shortly be launched in the United States.
"We note platinum outperformed gold and silver in the final
weeks of the year against an improved industrial demand outlook
and anticipation over increasing investor participation in
2010," said Morgan Stanley in a note.
(Editing by William Hardy)
