Gold rose on Tuesday as strong Asian physical demand and a weaker dollar helped the metal retrace some of this month's losses. Customers in Asia have been buying gold at a price that remains well off its record high above $1,430 an ounce, even as other commodities such as crude oil, copper and grains are trading near multi-year highs.
"Every time gold goes down, people see it as a buying opportunity, and there is a lot of good physical buying from Asia coming into the market place," said Miguel Perez-Santalla, vice president of sales at Heraeus Precious Metals Management.
Bullion has fallen more than 3 percent in January, on track for its biggest monthly decline since July. Gold rose 30 percent in 2010, but demand for safe-haven assets has waned this month on an outlook for a more robust global economy. Premiums for Asian gold bars rose to hit another two-year high on Monday as jewellers from China rushed to buy ahead of the Lunar New Year in early February.
Spot gold rose 0.4 percent to $1,367.80 an ounce by 12:41 pm EST (1741 GMT), while US February gold futures gained $7 percent to $1,367.50. Bullion started 2011 with its biggest two-week loss in nearly a year, after China tightened bank reserves to rein in inflation and as safe-haven demand faded.
The latest weekly US CFTC data showed noncommercial net longs declined over 12 percent, indicating a large fund might have exited the market, said Tom Pawlicki, precious metals and energy analyst at MF Global. The Federal Reserve's $600 billion bond-buying program to stimulate economic growth in the United States has ignited concern about an unwelcome pickup in inflationary pressures and a broad-based decline in the dollar, both of which would prove beneficial to gold.
Spot silver rose 2.5 percent to $28.96 an ounce. But analysts expected more declines for silver, which has dropped more sharply than gold this month after an 80-percent gain last year. Silver is down about 6 percent so far in January. In the platinum group metals, palladium gained 2.2 percent to $807.47 an ounce, near last week's ten-year highs, while platinum climbed 1.2 percent at $1,820.74.
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