* Gold rises 2 pct in February despite dollar strength
* Sovereign risk fears, low rates support bullion
* Indian import duty hike seen hitting gold imports
(Recasts, updates comments, market activity, changes byline, dateline,
previously LONDON )
By Frank Tang
NEW YORK, Feb 26 (Reuters) - Gold rose toward $1,120 an ounce on Friday,
posting its first monthly gain since November, as the metal benefited from
economic uncertainties and signs that U.S. interest rates would remain low in
the near term.
Federal Reserve chairman Ben Bernanke damped speculation that U.S. rates
will rise soon, and the International Monetary Fund's announcement to begin the
sale of 191.3 tonnes of gold also improved gold market sentiment.
[] []
In February, bullion climbed about 2 percent in the face of a resurgent
dollar, as fiscal fears about Greece and some European countries boosted the
greenback.
"The reality is that the sovereign risk in Europe is very high. Ultimately,
in my opinion, gold will divorce itself from following the day-to-day movement
of the euro," said Bill O'Neill, partner at LOGIC Advisors.
Gold, traditionally seen as a safe haven in economic chaos, has been moving
in tandem with asset classes that are perceived riskier in nature, taking the
lead from equities and other commodities such as oil.
Spot gold <XAU=> was at $1,115.90 an ounce at 2:50 p.m. EST (1950 GMT),
against $1,104.70 late in New York on Thursday. Bullion is still about 9
percent below its record high $1,226.10 on Dec. 3.
U.S. gold futures for April delivery <GCJ0> on the COMEX division of NYMEX
settled up $10.40 at $1,118.90 an ounce.
On Friday, gold buying increased, following gains in the euro, after a
report said that a German bank will buy Greek bonds. The euro has posted a
decline against the dollar for a third consecutive month in February. []
Standard Chartered analyst Daniel Smith said that the eventual weakness of
the dollar would be supportive to gold.
"At the moment momentum is in the direction of dollar strength...but the
focus should be on what is going to happen in the medium term, which will be
further dollar weakness as the economic recovery sets in."
Higher risk appetite due to positive U.S. economic data also helped gold.
An government report earlier showed the U.S. economy grew a touch faster than
first thought in the fourth quarter. []
Gold priced in euros <XAUEUR=R> also rose on Friday, trading near its
all-time highs.
"It is clear... (for) gold, in euro terms, that the trend remains rather
clearly upward," said Dennis Gartman, independent investor and editor of "The
Gartman Letter."
INDIA HIKES IMPORT DUTIES
Traders said India's move to raise customs duties on precious metals will
impact imports of the metals, which were starting to recover after a sharp fall
in 2009. []
Meanwhile, the author of an article that said China had confirmed it would
buy 191.3 tonnes of gold from the International Monetary Fund said on Friday
she didn't have official sources for her story. []
The head of the financial institute of the Development Research Centre, a
Cabinet think-tank, said China has to keep buying gold over a long period and
any price fall will present a good buying opportunity. []
Silver <XAG=> was at $16.44 an ounce versus $16.04, tracking gains in gold.
Platinum <XPT=> was at $1,537.50 an ounce against $1,529, and palladium <XPD=>
at $429.50 versus $420.
(Additional reporting by Jan Harvey in London; Editing by Rebekah Kebede)
