Gold soars on weak dollar, Hurricane Ike fears

By Frank Tang and Jan Harvey

NEW YORK/LONDON (Reuters) - Gold ended sharply higher on Friday, as the dollar fell on weak U.S. retail sales data and as Hurricane Ike, a potential catastrophe, moved toward the southwestern United States.

Other precious metals bounced back after Thursday's sharp losses, with platinum rising nearly 5 percent, palladium gaining 6 percent and silver ticking up almost 3 percent.

Spot gold was at $765.75/767.75 an ounce late by New York's last quote. Earlier it rallied to a session high of $765.75.

U.S. gold futures for December delivery settled up $19.00, or 2.6 percent, at $764.50 an ounce on the COMEX division of the New York Mercantile Exchange.

The dollar fell on profit-taking triggered by uncertainty over the future of troubled investment bank Lehman Brothers and data showing a second straight month of retail sales declines.

Gold, often bought as a currency hedge, typically moves opposite the dollar. The precious metal also is being helped by fears that oil prices could jump if Hurricane Ike disrupts U.S. production.

U.S. crude futures ended up 31 cents higher at $101.18 per barrel.

Hurricane Ike closed in on the Texas coast on Friday with a wall of water. U.S. officials warned it could be a catastrophic storm and flood 100,000 homes.

Gold often rises in times of natural disaster or financial turmoil because of its safe haven attribute.

DOWNWARD RISK

Although the dollar fell on Friday, the U.S. currency is expected to trend higher, so analysts remained cautious over the outlook for gold.

"There is some support around the $750 level. However, I see no evidence that the downtrend in the gold market has come to an end," Saxo Bank's Carlsson said. "The outlook for a stronger U.S. dollar will keep the pressure going."

Traders said they have seen firm demand for gold coins, bars and jewelry, but changing expectations for gold's price outlook are affecting buying.

"Physical demand increased again around the $750 levels, but a lot of customers expect a bigger (price) drop in the future," senior Commerzbank trader Michael Kempinski said. "Some customers are looking for $700."

Among other precious metals, platinum and palladium both bounced up after recent losses, as analysts suggested the metals may have been oversold.