* Bullion set to clock 25 pct gain for the year
* Up $219/oz, biggest dollar gains since 1979
* Sliding dollar boosts year-end interest in gold
* Platinum, palladium set to end 2009 with sharp gains
(Recasts, adds comments, prices, context, changes dateline to
NEW YORK from London)
By Frank Tang
NEW YORK, Dec 31 (Reuters) - Gold prices sealed their
biggest absolute annual gain in three decades with a small
advance on Thursday, rising for an unprecedented ninth year in
a row after dollar-hedging traders and central banks joined
investors who turned to gold for price performance and
protection.
Bullion rose 0.5 percent as the dollar ebbed and oil
climbed as high as $80. Palladium jumped 3.5 percent to notch a
record 119 percent return this year, bolstered by improving
industrial demand and anticipation of more investment with the
launch of a new U.S. exchange traded fund next year.
Spot gold <XAU=> stood at $1,096.90 an ounce at 12:23 p.m.
EST (1723 GMT). It was up about $220 this year, a sum eclipsed
in recent history only by 1979's $286 surge. On a percentage
basis gold rose 25 percent, short of 2007's 31 percent rise.
After 2008's roller coaster, this year was one of fairly
consistent gains for bullion, favored as a hedge against
economic uncertainties after the worst economic crisis since
the Great Depression.
U.S. February gold futures <GCG0> on the COMEX division of
the New York Mercantile Exchange rose $5.50 to $1,098.
Spot bullion hit a record high at $1,226.10 on Dec. 3 on a
combination of renewed central bank interest, long-term
inflation fears due to massive economic stimulus programs and
fears over paper currency depreciation.
The dollar index <.DXY> is set to end 2009 down about 4
percent, though it had risen 4 percent in December.
"Gold ... has been outperforming not just the dollar since
2000, but also most developed currencies as well as most
developed bond markets and most developed equity markets," Tom
Fitzpatrick, chief technical analyst at CitiFX, told Reuters
Insider in a television interview.
"Going forward, it will be an alternative to paper money. A
currency, rather than a commodity, and that's what it's been
doing so far," he said.
CENBANK BUYING FUELS SENTIMENT
Central banks also played a key role in aiding the rally
during a year in which China revealed that it had secretly
increased its reserves over the past five years to the world's
fifth-largest by buying up domestic production, while India
nearly doubled its holdings by buying half of the IMF's
stockpile slated for sale.
Buying of investment products such as gold exchange-traded
funds also fueled the metal's rally. Holdings of the world's
largest gold-backed ETF, New York's SPDR Gold Trust <GLD>, have
risen 353 tonnes or 45 percent in the year to 1,133.62 tonnes,
ranking its holdings among the world's central banks.
Analysts say the outlook for prices in 2010 will depend on
whether the Federal Reserve will tighten monetary policy to
keep inflation at bay. A rise in U.S. interest rates could lift
the dollar, and consequently weigh on gold.
The tone for the precious metals market early in the new
year will hinge on whether the dollar will extend its year-end
rally. Dollar strength makes commodities priced in the U.S.
unit more expensive for holders of other currencies.
Other precious metals staged equally impressive gains after
last year's deep decline, with platinum set to gain a record 58
percent and palladium up 119 percent on improving economic
conditions, as well as hope for a boost in physical demand from
new U.S. exchange traded funds expected to launch soon. Silver
also jumped by a record 50 percent.
Palladium <XPD=> hit a peak of $406.50 an ounce on
Thursday, breaking through the $400-an-ounce level for the
first time since July 2008. It was last at $405.50 versus New
York's late Wednesday quote of $391, while platinum <XPT=> was
at $1,463 versus $1,454 and silver <XAG=> at $16.89 versus
$16.79.
Prices at 12:39 p.m. EST (1739 GMT)
Last Change Pct 2008 YTD
Chg Close % Chg
US gold <GCG0> 1097.30 4.80 0.4 884.30 24.1
US silver <SIH0> 16.935 0.133 0.8 11.295 49.9
US platinum <PLF0> 1463.30 11.00 0.8 941.50 55.4
US palladium <PAH0> 409.00 12.90 3.3 188.70 116.7
Gold <XAU=> 1096.35 3.80 0.3 878.20 24.8
Silver <XAG=> 16.89 0.10 0.6 11.30 49.5
Platinum <XPT=> 1463.50 9.50 0.7 924.50 58.3
Palladium <XPD=> 404.50 13.50 3.5 184.50 119.2
Gold Fix <XAUFIX=> 1104.00 16.50 1.5 836.50 32.0
Silver Fix <XAGFIX=> 16.99 7.00 0.4 14.76 15.1
Platinum Fix <XPTFIX=> 1466.00 5.00 0.3 1529.00 -4.1
Palladium Fix <XPDFIX=> 402.00 9.00 2.3 365.00 10.1
(Additional reporting by Jan Harvey in London; Editing by
Christian Wiessner)
