NEW YORK (Reuters) - Gold rose on Tuesday as strong Asian physical demand and a weaker dollar helped the precious 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 jewelers from China rushed to buy ahead of the Lunar New Year in early February.
On Tuesday, gold benefited from a lower dollar against the euro on buying by sovereign funds and strong German data but doubts Europe can boost a rescue fund to head off debt problems may prevent further gains of the single currency.
The inverse correlation between gold and the dollar broke down last week as successful European bond sales lifted the euro against the dollar while reducing safe-haven demand for bullion.
Spot gold rose 0.2 percent to $1,367.80 an ounce by 3:19 p.m. EST, while U.S. February gold futures gained $7 percent to $1,367.50.
Spot silver rose 1.7 percent to $28.75 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.
Turnover in U.S. gold futures totaled about 180,000 lots, 15 percent above the 30-day average, but volume in COMEX silver was 4 percent lower, preliminary Reuters data showed.
The gold-to-silver ratio -- the number of ounces of silver needed to buy an ounce of gold -- fell on Tuesday but held near a one-month high at just below 48, showing that silver is outperforming gold.
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.
Some analysts said negative factors such as recent outflow in gold exchange traded funds and liquidation in U.S. futures should not be overlooked despite gold’s rise on Tuesday.
Tom Pawlicki, precious metals and energy analyst at MF Global, said the latest CFTC’s Commitment of Traders report, which showed that noncommercial net longs, or speculators, declined over 12 percent last week, indicated a large fund might have exited the market.
Pawlicki said that the February gold contract’s 50-day moving average at $1,385 and a bearish head-and-shoulder top pattern could represent strong technical resistance in the near term.
DOLLAR LINK ERODES
Gold, which usually benefits from any decline in the dollar, has declined this month even as the dollar index .DXY has fallen by nearly half a percent since the start of the year.
“There was a divergence and the euro/dollar is not trading tick-for-tick with gold. Right now they are separate stories, said Heraeus’ Perez-Santalla.
In the platinum group metals, palladium gained 2.5 percent to $809.72 an ounce, near last week’s ten-year highs, while platinum climbed 1.3 percent at $1,822.50.
Additional reporting by Amanda Cooper in London and Rujun Shen in Singapore; Editing by David Gregorio
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