* Dollar drop, crude rally trigger fund buying
* India imported more than expected bullion in 2009
* Platinum, palladium rise sharply on ETF expectations
(Recasts, updates comments, closing prices, market activity,
adds NEW YORK to dateline)
By Frank Tang and Jan Harvey
NEW YORK/LONDON, Jan 4 (Reuters) - Gold rose to a near
three-week high on Monday, gaining 2 percent as an oil price
rally and dollar decline spurred heavy fund buying on the first
trading day of 2010.
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.
"Gold was driven by allocation of new funds. The hedge
funds which liquidated in December are buying back their
positions to start off the new year," said Bruce Dunn, vice
president of trading at New Jersey-based Auramet.
Spot gold <XAU=> hit a high of $1,123.40 an ounce, and was
last at $1,117.85 an ounce at 3:13 p.m. EST (2013 GMT), against
$1,096.35 late in New York on Friday.
U.S. February gold futures <GCG0> settled up $22.10, or 2
percent, at $1,118.30 an ounce on the COMEX division of the New
York Mercantile Exchange.
The dollar weakened on Monday as broad gains in stock and
commodity prices encouraged investors to seek riskier,
high-yielding investments at the expense of the greenback.
[]
"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.
Other commodities rose, with oil climbing more than 2
percent and base metals prices rising. [] []
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.
RECOVERY SIGNS
Some signs emerged of recovering physical demand in India,
traditionally the world's largest bullion consumer.
The Bombay Bullion Association 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 $17.47 an ounce against New York's
late Friday quote of $16.84.
Platinum <XPT=> hit a peak of $1,519 an ounce, the highest
since August 2008. It was later at $1,518 against $1,465.50,
while palladium <XPD=> was at $418.50 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 and speculation platinum and
palladium-backed exchange traded products will shortly be
launched in the United States.
ETF Securities said in a U.S. regulatory filing that a
financial firm, which is also its lead market maker, has bought
shares of its proposed first-ever U.S. platinum exchange-traded
fund. []
(Editing by Christian Wiessner)
