* Gold down on profit taking but set for 10th yearly gain
* Gold/silver ratio hits 4-year low
* Palladium hits nine-year peak, silver near 30-year highs
* Coming up: U.S. auto sales due Jan. 4, PGMs in focus
(Recasts, adds comments, updates market activity, changes
byline/dateline, previously LONDON)
By Frank Tang
NEW YORK, Dec 30 (Reuters) - Gold eased on Thursday but
prices are still on track to post their biggest yearly rise in
three years for a record 10th consecutive annual gain on
uncertainty about economic recovery and currencies.
Silver and palladium, easily the top performing commodities
of the year, also hit multi-year highs on bullish demand
expectations for next year.
This year, bullion has benefited from safe-haven buying on
lingering worries about a euro zone debt crisis, a $600 billion
U.S. bond-buyback program and renewed demand from global
central banks, which are expected to become net buyers for the
first time in decades.
"The economy is still on life support, and it's only moving
forward based on the stimulus and Fed's action. In absence of
those, we would still be down on recession," said Frank McGhee,
head precious metals trader of Integrated Brokerage Services in
Chicago.
"If the economic picture turns brighter and you see the Fed
starting to take some of the liquidity out, then gold prices
could retreat as investors think the market has already priced
in what's out there," he said.
On Thursday, gold dropped after upbeat U.S. data, including
jobless claims, factory data and home sales buttressed the view
the economy gained momentum as the year ended. []
Spot gold <XAU=> slipped 0.4 percent to $1,404.80 an ounce
at 1:52 p.m. EST (1852 GMT). Bullion set a record high of
$1,430.95 on Dec. 7.
U.S. gold futures for February delivery <GCG1> settled down
$7.60 an ounce at $1,405.90.
The dollar dropped against a basket of currencies in a
mixed session after having risen earlier on concerns about the
euro zone debt crisis.
In 2011, the greenback is expected to continue to stay
weaker in a low U.S. interest rate environment due to the Fed's
accommodative monetary policy, said McGhee.
COMEX gold volume was slightly above 60,000 lots,
two-thirds lighter than its average for the past 30 days but in
line with lower turnover for most of the commodity complex,
preliminary Reuters data showed, as many traders have already
closed their books ahead of the new year.
The gold price is set to gain 28 percent, its strongest
yearly performance since a 31 percent rise in 2007 when the
global financial crisis began to manifest itself.
The euro zone debt crisis, which unfolded in April this
year and culminated in multibillion euro international bailouts
for both Greece and Ireland, has been one of the prime drivers
of investment demand for gold.
Spot silver <XAG=> eased 0.2 percent to $30.49, having
earlier hit a 30-year high at $30.88. The gold/silver ratio,
which denotes each metal's relative performance, reached a
four-year low.
"These last few days it seems as if silver has been the
main driver and gold is just trotting along with a lack of
sellers," said Saxo Bank senior manager Ole Hansen.
"Once something has a firm trend established, it's easy to
push ... There has to be a story behind it to justify it;
otherwise you would have seen profit-taking setting in a while
back," he added.
Silver is at its highest since early 1980 and on course for
an 83 percent gain this year, its strongest performance in at
least 27 years.
SILVER LINING
Investors have flocked into silver this year as a cheaper
safe-haven alternative to gold, which hit a record high of
$1,430.95 an ounce in early December.
Holdings of silver in the iShares Silver Trust <SLV>, the
world's largest exchange-traded fund backed by physical silver,
have risen to 10,903.34 tonnes, from 9,492.97 tonnes at the end
of last year, while open interest in U.S. silver futures has
risen by 8,801 contracts, or 44.0 million ounces.
Holdings of gold in the SPDR Gold Trust <GLD>, the world's
largest exchange-traded fund backed by physical bullion, have
risen 15 percent this year to 1,284.062 tonnes, and a near 20
percent rise in open interest in U.S. gold futures also
reflects some of this investor desire to hold gold. []
<0#CFTC>
Palladium was set for a second year of gains, having almost
doubled to near $800 an ounce over the course of 2010 and is
this year's top performing commodity.
Analysts widely expect a surge in demand for palladium next
year, mainly from China, which boasts the world's largest auto
market that is dominated by gasoline-powered vehicles, which
use palladium in their catalytic converters.
In the United States, December is expected to be the third
straight month of strong auto sales, capping a year of gradual
recovery for the sector. []
The ratio of platinum to palladium, used to measure how
many ounces of palladium is used to buy an ounce of platinum,
has fallen to its lowest in about eight years this year,
mirroring palladium's outperformance over platinum, which
relies heavily on the flagging European car market as a source
of industrial demand. (Graphic:
http://link.reuters.com/cef34r)
Spot palladium <XPD=> eased 0.7 percent to $784.72, while
platinum <XPT=> dipped 0.7 percent to $1,747.25.
Prices at 2:35 p.m. EST (1935 GMT)
LAST/ NET PCT YTD
CLOSE CHG CHG CHG
US gold <GCG1> 1405.90 -7.60 -0.5% 28.3%
US silver <SIH1> 30.513 -0.191 0.0% 81.1%
US platinum <PLJ1> 1744.30 -9.90 -0.6% 18.6%
US palladium <PAH1> 786.20 -7.20 -0.9% 92.3%
Gold <XAU=> 1405.16 -5.83 -0.4% 28.2%
Silver <XAG=> 30.51 -0.04 -0.1% 81.2%
Platinum <XPT=> 1744.49 -12.00 -0.7% 19.0%
Palladium <XPD=> 784.97 -5.50 -0.7% 93.6%
Gold Fix <XAUFIX=> 1405.50 -6.00 -0.4% 27.3%
Silver Fix <XAGFIX=> 30.70 26.00 0.9% 80.7%
Platinum Fix <XPTFIX=> 1755.00 5.00 0.3% 19.7%
Palladium Fix <XPDFIX=> 797.00 0.00 0.0% 98.3%
(Additional reporting by Amanda Cooper in London and Rujun
Shen in Singapore;editing by Sofina Mirza-Reid)
