Gold Rises 2% on Weaker Dollar


"Positive manufacturing data from China has given equities and commodities a lift"

Gold futures climbed 2% on Monday to end near $1,120 an ounce as the U.S. dollar weakened, raising the metal's investment appeal.

Other commodities also gained, getting a lift after China and the U.S. reported upbeat manufacturing data. Palladium rose to the highest level in more than 17 months.

Gold for February delivery rose $22.10 to settle at $1,118.30 an ounce on the Comex division of the New York Mercantile Exchange, after rising as high as $1,124.60 earlier.

Futures prices ended the year's trading up 24% to mark their ninth-consecutive yearly gain, but they are off their record high above $1,220 an ounce seen in early December.

"Positive manufacturing data from China has given equities and commodities a lift," said James Moore, an analyst at Gold prices "in the short-term will continue to look to the dollar for direction."

Investors will increase "their exposure as a way to offset devaluation of fiat currencies and take advantage of improving fundamentals."

Holdings in the SPDR Gold Trust (GLD), the biggest gold exchange-traded fund, stood at 1,133.62 metric tons at the end of last year, up 45% in 2009.

"A strong Chinese economy would suggest increased consumer purchases of gold in the country, as well as possible future purchases by China's central bank," said Martin Hennecke, an associate director at Tyche Group Ltd.

"There is also renewed fear of inflation in China and globally," he said. "Gold is widely bought as a hedge against inflation and becomes more attractive when inflation risks are on the rise."

In other metals Monday, March palladium rallied 3.1% to $421.40, staying near the highest level since July 2008. April platinum gained 3.6% to $1,523.90 an ounce, and March silver added 3.7% to $17.463 an ounce.

March copper gained 1.8% to $3.406 a pound.

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