Gold rallies to near 4-month highJanuary 31, 2009 - 7:49AM Gold...

Gold rallies to near 4-month highJanuary 31, 2009 - 7:49AM
Gold rallied to a near four-month high on Friday, fueled by flight-to-quality buying and an overall increase in asset allocation toward bullion as an investment.

"There is a major safe haven buying in the gold. We are seeing gold appreciate against all currencies. The gold market is certainly anticipating a much bigger systemic problem down the road," said Frank McGhee, head precious metals trader of Integrated Brokerage Services.

Spot gold was at $US926.00 an ounce, up 2.1% from $US906.75, its last trade on Thursday in New York. It rallied to a high of $US930.40, which marked its loftiest level since Oct. 10.

Gold priced in euros hit a record high of 725.34 euros.

US gold futures for April delivery settled up $US21.90, or 2.4%, at $US928.40 an ounce on the COMEX division of the New York Mercantile Exchange.

Gold is being supported by interest in the precious metal as a haven from risk.

Fund managers said that investors overall were allocating more of their portfolio money into gold instead of other asset classes such as stocks, and the move fueled the yellow metal's latest rally.

Gold has risen 3.5% this week as investors have scrambled for the safety of gold and bullion-backed assets such as exchange-traded funds.

"The ETFs were up another 15 tonnes yesterday," Simon Weeks, director of precious metals at the Bank of Nova Scotia, said, adding safe haven demand was driving the market.

The world's biggest gold-backed ETF, New York's SPDR Gold Trust, said its holdings jumped more than 10 tonnes on Thursday to a record 843.59 tonnes.

SPDR's holdings have risen more than 63 tonnes or 8% since Dec. 31.

Market talk of China taking an interest in gold as an alternative to US Treasuries, and of a European fund buying bullion, also helped support prices.

Gold rose in spite of a two% drop of US equities, ignoring a lower appetite for risky assets.

The dollar rose against the euro after weak euro zone data and less-than-stellar US economic reports heightened fears that the global downturn could be prolonged and even deeper than many initially feared.

Although gold usually moves in the opposite direction to the dollar, the negative correlation between the two has broken down in recent weeks as both assets gained on risk aversion.

Indian gold hits record

Jewellery demand remains hamstrung by high prices. In India, the world's biggest bullion market, gold futures touched an all-time high of 14,448 rupees per 10 grams, deterring buyers.

Russia's gold output rose by 13.3% to 184.49 tonnes last year, chiefly on the back of improving mine output, the Russian Gold Industrialists Union said.

Silver tracked gold, rising to a peak of $US12.65 an ounce, its highest price since Oct. 1. It ended at $US12.56 an ounce, up 2% from its previous close of $US12.31.

Silver ETFs have also risen sharply this year, with the largest, the iShares Silver Trust, up 660 tonnes or 10% in the year to date.

Among other precious metals, platinum was at $US982.00 an ounce, up 1% from its last finish of $US972.50, while palladium was at $US190.50 an ounce, down 0.5% from its previous close of $US191.50.

A Reuters survey of 56 precious metals analysts and traders showed most expected the platinum group metals to post significant losses this year as the global economic slowdown pressures demand.