* Dollar weakens further; euro eyes $1.50
* Crude oil hits 12-month high above $79 a barrel
* Gold demand wilts in India after festival season
(Recasts, updates comments, closing prices, market activity,
adds second byline, dateline)
By Frank Tang and Jan Harvey
NEW YORK/LONDON, Oct 19 (Reuters) - Gold rose nearly 1
percent on Monday, as a dollar drop boosted bullion's appeal as
a hedge against the weakening value of paper assets due to
currency depreciation.
Gold's recent movements were largely led by currency
markets, as investors fretted over economic uncertainty after
governments and central banks pumped massive liquidity to
battle recession.
A nationwide strike by miners in Peru, the world's No. 6
producer of gold, also improved buying sentiment.
U.S. December gold futures <GCZ9> settled up $6.60 at
$1,058.10 an ounce in the COMEX division of the New York
Mercantile Exchange.
Spot gold <XAU=> was at $1,060.70 an ounce at 3:04 p.m. EDT
(1904 GMT) against $1,050.80 late in New York on Friday.
Dollar weakness was identified by analysts as the primary
driver behind gold's rally to record highs last week.
Commodities priced in dollars become cheaper to non-dollar
investors as the U.S. currency weakens.
"If the dollar continues weakening, we ought to see a test
of $1,072," said Afshin Nabavi, head of trading at MKS
Finance.
Strength in bellwether commodity crude oil in early trade
also lifted interest in gold as a hedge against oil-led
inflation, and in commodities as an asset class, analysts
said.
Oil prices rose above $79 a barrel on Monday to their
highest in 12 months. []
Buying increased after Peru's union leaders said walkouts
hit mines of Buenaventura, Barrick and Volcan, but those of
global heavyweights such as Southern Copper, Freeport, BHP
Billiton and Newmont operated normally. []
However, weakness in physical demand is limiting further
gains in the precious metal after last week's record high at
$1,070.40 an ounce.
Demand for physical gold was lackluster as Diwali -- a
major gold-buying event -- in top bullion consumer India came
to an end, with near-record prices curbing appetite for the
metal.
"Technically, charts have reached an overbought zone, and
this, along with demand dip in physical markets, is an
indication of a correction," said Pradeep Unni, a senior
analyst at Richcomm Global Services.
"The markets have been dull post-Diwali and demand was
quite lackluster, with prices scouting around all-time high
levels."
Gold buying in India, the world's biggest bullion consumer
last year, slowed to a trickle as the festival season came to
an end, while scrap supply crept up in some Asia regions as
high prices encouraged sales. [] []
In exchange news, CME Group Inc <CME.O>, the world's top
derivatives exchange operator, began accepting physical gold as
collateral for all trading products, marking the first time an
exchange has allowed gold bullion to be used for margin
requirements. []
Among other precious metals, silver <XAG=> was at $17.68 an
ounce against $17.41, platinum <XPT=> at $1,355.50 an ounce
versus $1,347 and palladium <XPD=> at $331 versus $326.50.
Palladium prices have risen some 9 percent in the last four
months, beating gold's 5 percent gains and a 1.4 percent rise
in platinum prices in the same period.
The metal is benefiting from expectations industrial demand
for the autocatalyst material will recover if an economic
recovery picks up steam, fears over the availability of
stockpiled Russian metal and firm investment buying.
Close Change Pct 2008 YTD
Chg Close % Chg
US gold <GCZ9> 1058.10 6.6 0.6 884.3 19.7
US silver <SIZ9> 17.625 0.205 1.2 11.295 56.0
US platinum <PLF0> 1364.20 15.70 1.2 941.50 44.9
US palladium <PAZ9> 334.40 3.75 1.1 188.70 77.2
Prices at 3:03 p.m. EDT (1903 GMT)
Gold <XAU=> 1060.70 9.90 0.9 878.20 20.8
Silver <XAG=> 17.68 0.27 1.6 11.30 56.5
Platinum <XPT=> 1355.50 14.50 1.1 924.50 46.6
Palladium <XPD=> 331.00 4.500 1.4 184.50 79.4
Gold Fix <XAUFIX=> 1050.50 -4.00 -0.4 836.50 25.6
Silver Fix <XAGFIX=> 17.52 21.00 1.2 14.76 18.7
Platinum Fix <XPTFIX=> 1352.00 2.00 0.1 1529 -11.6
Palladium Fix<XPDFIX=> 331.00 2.00 0.6 365.0 -9.3
(Editing by Christian Wiessner)
