* Gold lifted by weaker dollar; euro cuts gains
* Strong Asian demand ahead of Lunar New year supports
* Silver outpaces gold's gains, still down 6 pct on month
* Coming up: U.S. Dec housing starts on Wednesday
(Recasts, updates prices, market activity; new byline,
dateline, previously LONDON)
By Frank Tang
NEW YORK, Jan 18 (Reuters) - Gold rose on Tuesday as strong
Asian physical demand and a weaker dollar helped the metal
retrace some of this month's losses.
Customers in Asia have been buying gold at a price that
remains well off its record high above $1,430 an ounce, even as
other commodities such as crude oil, copper and grains are
trading near multi-year highs.
"Every time gold goes down, people see it as a buying
opportunity, and there is a lot of good physical buying from
Asia coming into the market place," said Miguel Perez-Santalla,
vice president of sales at Heraeus Precious Metals Management.
Bullion has fallen more than 3 percent in January, on track
for its biggest monthly decline since July. Gold rose 30
percent in 2010, but demand for safe-haven assets has waned
this month on an outlook for a more robust global economy.
Premiums for Asian gold bars rose to hit another two-year
high on Monday as jewelers from China rushed to buy ahead of
the Lunar New Year in early February. []
On Tuesday, gold benefited from a lower dollar against the
euro on buying by sovereign funds and strong German data but
doubts Europe can boost a rescue fund to head off debt problems
may prevent further gains of the single currency. []
The inverse correlation between gold and the dollar broke
down last week as successful European bond sales lifted the
euro against the dollar while also reducing safe-haven demand
for bullion.
Spot gold <XAU=> rose 0.4 percent to $1,367.80 an ounce by
12:41 p.m. EST (1741 GMT), while U.S. February gold futures
<GCG1> gained $7 percent to $1,367.50.
Bullion started 2011 with its biggest two-week loss in
nearly a year, after China tightened bank reserves to rein in
inflation and as safe-haven demand faded.
The latest weekly U.S. CFTC data showed noncommercial net
longs declined over 12 percent, indicating a large fund might
have exited the market, said Tom Pawlicki, precious metals and
energy analyst at MF Global.
Pawlicki said that the February gold contract's 50-day
moving average at $1.385 and a bearish head-and-shoulder top
pattern could represent strong technical resistance.
DOLLAR LINK ERODES
Gold, which usually benefits from any decline in the
dollar, has declined this month even as the dollar index <.DXY>
has fallen by nearly half a percent since the start of the
year.
"There was a divergence and the euro/dollar is not trading
tick-for-tick with gold. Right now they are separate stories,
said Heraeus' Perez-Santalla.
In light of the stronger data and expectations for robust
fourth-quarter U.S. earnings, gold could encounter more
pressure and Societe Generale analyst David Wilson said
ultimately monetary policy in the United States would be the
deciding factor in the direction of the bullion price.
The Federal Reserve's $600 billion bond-buying program to
stimulate economic growth in the United States has ignited
concern about an unwelcome pickup in inflationary pressures and
a broad-based decline in the dollar, both of which would prove
beneficial to gold.
Spot silver <XAG=> rose 2.5 percent to $28.96 an ounce. But
analysts expected more declines for silver, which has dropped
more sharply than gold this month after an 80-percent gain last
year. Silver is down about 6 percent so far in January.
In the platinum group metals, palladium <XPD=> gained 2.2
percent to $807.47 an ounce, near last week's ten-year highs,
while platinum <XPT=> climbed 1.2 percent at $1,820.74.
Prices at 1:13 p.m. EST (1812 GMT)
LAST NET PCT YTD
CHG CHG CHG
US gold <GCG1> 1367.30 6.80 0.5% -3.8%
US silver <SIH1> 28.915 0.595 2.1% -6.5%
US platinum <PLJ1> 1827.90 11.90 0.7% 2.8%
US palladium <PAH1> 811.05 20.55 2.6% 1.0%
Gold <XAU=> 1367.65 5.25 0.4% -3.7%
Silver <XAG=> 28.90 0.64 2.3% -6.4%
Platinum <XPT=> 1822.24 23.39 1.3% 3.1%
Palladium <XPD=> 807.75 17.42 2.2% 1.0%
Gold Fix <XAUFIX=> 1369.50 0.75 0.1% -2.9%
Silver Fix <XAGFIX=> 28.79 60.00 2.1% -6.0%
Platinum Fix <XPTFIX=> 1824.00 1.00 0.1% 5.4%
Palladium Fix <XPDFIX=> 805.00 1.00 0.1% 1.8%
(Additional reporting by Amanda Cooper in London and Rujun
Shen in Singapore)
