Gold makes gains as dollar's drop may spur investor demand

The U.S. Dollar Index, a six-currency gauge of the greenback's value, fell for a second day after rising to a three-month high on Dec. 22. Gold has slid 6.4 percent this month as the dollar index gained 3.6 percent. Gold typically moves inversely to the U.S. currency.

“Sentiment remains firm this morning as the greenback remains under pressure,” James Moore, an analyst at TheBullionDesk.com in London, said in a report.

Gold for immediate delivery gained US$17.05, or 1.6 percent, to US$1,104.60 an ounce at 11:29 a.m. local time, the biggest increase since Dec. 2.

Gold for February delivery in New York was 1 percent higher at US$1,105.30 an ounce.

Among other precious metals for immediate delivery in London, silver increased 1.3 percent to US$17.325 an ounce. Palladium jumped 5.5 percent to US$378.29 an ounce and platinum gained 2.8 percent at US$1,459.50 an ounce.

The metal increased to US$1,104.50 an ounce in the morning “fixing” in London, used by some mining companies to sell production, from US$1,085.25 at Wednesday's afternoon fixing. The dollar index slid as much as 0.5 percent Thursday.

Gold has gained 25 percent this year as U.S. growth slumped during the worst recession since World War II, spurring demand for the precious metal as an investment haven. Gold holdings in the SPDR Gold Trust, the biggest exchange-traded fund backed by bullion, were unchanged for a second day at 1,132.71 metric tons Wednesday, according to the company's Web site.

Investors should avoid building new positions in a market thinned out by year-end holidays, said Jon Nadler, a senior analyst with Kitco Metals Inc.

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