* Dollar wilts versus euro, lifting precious metals
* Crude oil, base metals prices also rise
* Platinum, palladium hit multi-month highs
(Updates prices, adds comment)
By Jan Harvey
LONDON, Jan 4 (Reuters) - Gold rose 2.5 percent to a
three-week high on Monday as caution ahead of key U.S. data due
later this week put pressure on the dollar, and amid speculation
inflation may rise this year.
Gold strength lifted other precious metals, with palladium
climbing to its highest since July 2008, and platinum hitting a
16-month peak. Both are taking support from talk of new
platinum- and palladium-backed exchange-traded funds.
Spot gold <XAU=> hit a high of $1,123.40 an ounce and was
bid at $1,122.50 an ounce at 1446 GMT, against $1,096.35 late in
New York on Friday.
"Today's move is largely due to the currency markets," said
Daniel Major, an analyst at RBS Global Banking & Markets.
"Throughout commodities as a whole, index rebalancing is
likely to bring a fair bit of volatility in the coming days, and
that volatility may be reflected in gold," he added.
The precious metal closely tracks the dollar, with weakness
in the unit boosting gold's appeal as an alternative asset, and
making commodities cheaper for other currency holders.
The dollar weakened on Monday as investors locked in recent
gains ahead of U.S. economic data this week that could dictate
the currency's direction in the coming months. []
Other commodities rose, with oil climbing more than 2
percent and base metals prices rising. [] []
U.S. gold futures for February delivery <GCG0> on the COMEX
division of the New York Mercantile Exchange rose $26.50 to
$1,122.70 an ounce.
Analysts say the outlook for the precious metal is bright as
the new year gets underway, amid fears global monetary stimulus
could lead to rising inflation later in 2010.
"Further upside in gold is expected, with all the
uncertainty still out there," said Calyon metals analyst Robin
Bhar. "Governments are still stimulating their economies and may
be forced to continue doing so going into the second half."
"That (could lead) to further devaluation of paper
currencies, and more importantly, it may now give rise to
inflation," he added. "We are seeing signs of that in the UK,
and more so in the emerging economies like China."
RECOVERY SIGNS
On the physical market, buying of gold exchange-traded funds
was light at year-end, with the SPDR Gold Trust <GLD>, the
largest gold-backed ETF, reporting no change to its holdings on
Friday, the last day of 2009.
Some signs emerged of recovering physical demand in India,
the world's largest bullion consumer in 2008, after high prices
curbed buying for much of last year.
The Bombay Bullion Association said on Friday Indian gold
imports rose to a provisional 32-35 tonnes in December from 3
tonnes a year before. []
The BBA also lifted its estimate of total 2009 Indian gold
imports to 300-350 tonnes on Monday, from a previous estimate of
a little over 200 tonnes. []
Silver <XAG=> was at $17.36 an ounce against $16.84.
Platinum <XPT=> hit a 16-month peak of $1,509.50 an ounce
and was later at $1,508.50 against $1,465.50, while palladium
<XPD=> was at $419.50 an ounce against $405.50, having earlier
hit a 17-month high at $420.50.
Platinum group metals prices are benefiting from hopes for
an economic recovery in 2010, which is likely to boost demand,
and speculation platinum and palladium-backed exchange traded
products will shortly be launched in the United States.
"We note platinum outperformed gold and silver in the final
weeks of the year against an improved industrial demand outlook
and anticipation over increasing investor participation in
2010," Morgan Stanley said in a note.
(Editing by Sue Thomas)
