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Gold rises in Asia on dollar, unruffled by drop in oil prices

Gold rose in Asia after two days of losses as investors speculated the US dollar would weaken and boost the precious metal's appeal as an alternative investment.

Gold generally moves in the opposite direction of the dollar, which was little changed in Asia after a rebound late yesterday in New York. Last year, the dollar fell 10% against the euro, while gold gained 23%. Gold proved resilient even as oil prices fell yesterday by the most in 20 months, which would normally erode the metal's allure as an inflation hedge. „It seems investors are more concerned with dollar weakness in the future than the oil prices,” said Wang Xingyou, Beijing-based senior gold analyst at Agricultural Bank of China, one of the four largest banks in the country. „Gold will be increasingly treated as a dollar proxy.”

Gold for immediate delivery rose as much as $2, or 0.3%, to $624 an ounce. It traded at $623.50 at 11:07 a.m. Singapore time. The metal fell 0.9% to $622 yesterday. Gold futures for February delivery fell $1, or 0.2%, to $625.20 an ounce on the Comex division of the New York Mercantile Exchange. The dollar may fall from near a two-month high against the yen on speculation a government report today will show US job growth slowed in December, according to Kathy Lien, chief currency strategist at Forex Capital Markets LLC in New York. The dollar traded at $1.3078 per euro at 11:36 a.m. Singapore time, compared with 1.3084 late yesterday in New York. It reached its strongest since December 19 yesterday.

Crude oil plunged 8.3% during the previous two days, the most since December 2004, as mild US weather curbed demand for heating fuel. Prices touched $55.27 a barrel today and are down 12.5% from a year ago. The Reuters/Jefferies Commodity Price Index of 19 commodities fell to as low as 292.58 today, the lowest since February 2005, led by an 8.1% decline in copper this year. Physical buying in Asia before the Lunar New Year in February has also helped to curb losses in gold, even as energy and industrial metals slide, said Wang at Agricultural Bank of China.

„The Lunar New Year is the most important festival in Northern Asia and part of Southeast Asia, so we will continue to see some buying from jewelers,” Wang said. Among other precious metals for immediate delivery in Asia, silver rose 5 cent to $12.65, palladium gained $1.50 to $338.50 while platinum rose $7.25 to $1,127.75. A futures contract is an obligation to buy or sell a commodity at a set price for delivery by a specific date. (Bloomberg)