* Gold pressured as firm dollar prompts profit-taking
* Wall Street rally, oil gains lift bullion off its lows
* Underpinned by geopolitical tensions, physical demand
(Recasts, updates with quotes, closing prices, adds NEW YORK
to dateline)
By Frank Tang and Jan Harvey
NEW YORK/LONDON, Jan 2 (Reuters) - Gold slipped 1 percent
on Friday, pressured by a stronger dollar, but bullion will
resume its rally in 2009 if the metal can continue to thrive as
a monetary vehicle during economic turmoil.
Prices remained underpinned by firm physical demand for
gold, however, as investors bought the metal as a haven from
risk over fears about the global financial outlook.
Spot gold <XAU=> traded at $875.10 an ounce at 2:27 p.m.
EST (1927 GMT), down 0.6 percent from the last trade in the
previous session. Gold futures for February delivery <GCG9>
settled down $4.80 at $879.50 an ounce on the COMEX division of
the New York Mercantile Exchange.
Jonathan Jossen, COMEX gold options floor trader, said that
gold's outlook this year would largely hinge on the health of
the global economy.
"It depends on whether investors look at gold as an
economic tool. We are in a world of turmoil besides the
economic situations," said Jossen.
Jossen cited the simmering geopolitical tensions and strong
physical demand for support. Next week's trading should provide
a better indication of gold's outlook, he said.
"It all depends if the funds are going to come back to
these markets again," Jossen said.
The firmer dollar curbed interest in gold, which is
sometimes bought as an alternative investment to the U.S.
currency. []
However, a rally on Wall Street helped gold to partially
erase initial gains. The blue-chip heavy Dow Jones industrial
average <> rose above 9,000 points, trading at its highest
level in nearly two months.
The other main external influence on gold -- oil --
reversed initial losses to turn 4 percent higher on rising
tensions in the Middle East and a dispute between Russia and
Ukraine over natural gas supplies. []
Gold tends to move in line with crude, both because it can
be used as a hedge against oil-led inflation and as rising
crude prices often increase interest in commodities as an asset
class.
PHYSICAL DEMAND FIRM
Nonetheless, demand for physical gold from investors is
firm, traders said. "We are still seeing some interest from the
retail side for investment bars," said Wolfgang
Wrzesniok-Rossbach, head of sales at precious metals group
Heraeus.
"Since the crisis in the financial markets started, gold
has really benefited from its role as a crisis metal, or a safe
haven," he said.
Strong physical demand could be seen because of record
bullion holdings in the world's largest gold-backed
exchange-traded fund, SPDR Gold Trust. <GLD> <XAUEXT-NYS-TT>
However, gold imports into India, the world's largest
bullion market, fell 81 percent year-on-year in December to
just 3 tonnes, the Bombay Bullion Association said.
[]
Silver <XAG=> was at $11.46 an ounce, up 1.2 percent from
its Wednesday close of $11.32.
Platinum and palladium, which posted heavy losses last year
on fears over falling demand from carmakers, also rose on a
better economic outlook following the stock market's rally.
Spot platinum <XPT=> was at $942.00 an ounce, 1.1 percent
higher from its last finish of $932, while palladium <XPD=> was
at $189.50 an ounce, up 2.7 percent from its previous close of
$184.50.
(Reporting by Frank Tang; editing by Jim Marshall))
