* Gold rises 2 percent on safe-haven play, Egypt unrest
* Bullion set for biggest one-day gain in nearly 2 months
* Dollar, U.S. Treasuries, crude oil rally; stocks down
* Coming up: U.S. December personal income on Monday
(Recasts, adds comments, updates prices, market activity)
By Frank Tang
NEW YORK, Jan 28 (Reuters) - Gold surged 2 percent on
Friday, gaining as much as $40 per ounce in a knee-jerk rally
as fears that unrest in Egypt would spread across the Middle
East prompted safe-haven buying.
"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.
Investors often turn to gold as an insurance at the expense
of paper currencies during political and economic uncertainty.
Gartman said he did not expect Egypt's unrest to be over
anytime soon, and that gold could further benefit from chaos
possibly 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 in nearly
two months. U.S. gold futures for February delivery <GCG1>
settled up $22.3 at $1,340.70 an ounce.
Spot silver <XAG=> rose 3.5 percent to $27.82 an ounce.
U.S. COMEX gold futures volume totaled about 300,000 lots,
roughly two-thirds higher than its 30-day average, and silver's
volume was 35 percent higher, preliminary Reuters data showed.
Turnover during Friday's rally matched the higher volume
earlier this week, when prices tumbled.
The dollar and U.S. Treasuries rose as Egypt's protests
drove investors to seek safer assets. Stocks fell around the
world and other commodities gained, led by oil, which jumped to
nearly $100 a barrel in London. []
Egyptian President Hosni Mubarak sent troops and armored
cars onto the streets of Cairo and other Egyptian cities on
Friday in an attempt 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.
Earlier in the session, gold touched a four-month low of
$1,308.00 an ounce, having fallen 2.6 percent on Thursday on a
run of firmer-than-expected U.S. economic data.
Despite Friday's rally, gold notched a four-week losing
streak, its longest consecutive weekly decline in a year.
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, and that led
to a 14 percent drop in open interest, the Wall Street Journal
said. []
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. []
ETF INVESTMENT EASES
Investment demand for gold has been soft this year, with
holdings of the SPDR Gold Trust, 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)
