Gold up, palladium highest since 2001, on dollar


* Palladium reaches $617.50 

* Robust physical demand supports gold prices 

* COMING UP: Federal Reserve’s Bernanke to speak at 1230 GMT 

LONDON, Oct 25 (Reuters) – Gold rose more than one percent on Monday and palladium hit its highest in nearly a decade, as the dollar slumped after weekend comments at the G20 meeting and investors awaited a speech by the Federal Reserve Chairman. 

Spot palladium rose to $617.50, its highest since mid-2001, from $586.98 an ounce late in New York on Friday. 

Spot gold rose to $1,345.19 an ounce by 0930 GMT, off the 2-1/2 week low at $1,315.09 hit last Friday and crossing above the 20-day moving average at $1,339.46. It was at $1,326.70 late in New York on Friday. 

Analysts said the Group of 20 (G20) finance ministers on Saturday pointed to a status quo in currency markets, with the dollar staying pressured due to market expectations for the Federal Reserve to unveil a second round of quantitative easing as early as November. 

“This is to do with the fact that the G20 communique failed to produce anything concrete on the coordinated exchange rates policy,” Andrey Kryuchenkov, analyst with VTB Capital, said of the dollar’s loss and gold’s subsequent rise. 

“There is still a lot of uncertainty about exchange rates… (and)… the size and format of the QE,” he added. 

Federal Reserve chairman Ben Bernanke was due to speak at 1230 GMT. 

The dollar fell 0.9 percent versus a major currency basket,, making dollar-priced metals cheaper for non-U.S. investors. 

The U.S. gold futures for December delivery rose 1.5 percent to $1,345.3 an ounce. 

ROBUST PHYSICAL DEMAND 

Robust physical demand from India ahead of its important festival season, as well as from other countries, is likely to keep gold prices buoyed. 

The ongoing concerns on the recovery of the global economy and inflation due to lax monetary policies have made gold a popular investment, pushing the precious metal up by a fifth so far this year, outpacing copper’s 16 percent gain. 

BlackRock Inc, the world’s largest money manager, expected gold prices to rise further thanks to a lack of world production growth, increasing appetite among central banks to hold more gold as a safe-haven investment. 

Silver was at $23.69 an ounce from $23.24 an ounce and platinum was at $1,691.67 an ounce from $1,667.75 an ounce. 

“It’s more or less a dollar story, but it could be sustainable, there’s still a lot of reasons to be long gold – quantitative easing and the inflation that will come sooner or later,” said Deutsche Bank trader Michael Blumenroth. 

(Editing by Keiron Henderson) 

2010-10-25 12:04:31

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