Gold rallies in London

Gold jumped more than two percent to a seven-week high on Tuesday as a sharp decline in the dollar and firmer oil prices triggered speculative fund buying, dealers said.
Other precious metals tracked gold higher, with spot palladium hitting a 4-1/2-month peak, platinum rising to a seven-week high and silver reaching its highest in more than a month. Gold climbed to $645.50 ounce and was quoted at $645.40/646.40 by 1554 GMT, up from $632.60/633.60 in New York late on Monday.
"The buying we have seen this morning has been predominantly funds. The gold market is going to encounter quite a bit of chart resistance, but if we break above $648 an ounce, the market will go to $676," said Peter Hillyard, head of metals sales at ANZ Investment Bank.
"It will be helped obviously by stronger oil prices and a weaker dollar. All of the signs are good for gold." The dollar fell against the euro and sank to a 14-year low versus sterling as strong economic data and hawkish comments by central bankers suggested European interest rates would continue to rise.
Oil climbed one percent, underpinned by stubborn support at $50 a barrel but capped by ample fuel supplies in top consumer the United States. A weaker dollar makes gold cheaper for holders of other currencies. The metal is also seen as a hedge against oil-led inflation.
"We see some upside potential for gold over the course of 2007, as a series of key price determining factors are set to turn more positive for the metal," Barclays Capital said. "From a fundamental perspective, fabrication demand has shown signs of stabilising following last year's sharp fall and - barring another surge in price and volatility - demand is likely to consolidate and firm up gradually over the year."
Gold, used in jewellery and investment, has been erratic this year, jumping to $644.90 on January 3 before tumbling to $601.70 two days later. "It really needs to establish itself above that $642 level to maintain momentum and probably maintaining investor confidence," said Darren Heathcote of Investec Australia.
In other precious metals, palladium touched $348 an ounce, the highest since early September. It was last quoted at $345/350, compared with $341/346 in New York.
Silver rose as high as $13.21 an ounce and was last at $13.20/13.26, versus $13.01/13.08. Platinum hit $1,168 an ounce, the highest since December 4, before slipping to $1,165/1,170, against $1,156/1,162 in New York.