Gold hits five-week high in European trade

Gold prices rose 2 percent in Europe on Monday to a five-week high of $1,161.50, benefiting from weakness in the dollar as traders bet on US interest rates staying low in the immediate future. Spot gold was bid at $1,153.30 an ounce at 1629 GMT, against $1,137.90 late in New York on Friday.
US gold futures for February delivery on the COMEX division of the New York Mercantile Exchange rose $15.50 to $1,154.30 an ounce. The metal is building on gains made in the first trading week of the new year, when prices climbed nearly 4 percent.
"The technical situation for gold improved last week," Peter Fertig, a consultant at Quantitative Commodity Research, said. "In addition of course, the US dollar has given back some of the gains it made at the end of last year. "All in all I see further upside potential for gold. I still expect during the first few months of the year we will hit new record highs." Gold hit a record high $1,226.10 an ounce in December.
In New York, the world's largest gold-backed exchange-traded fund reported a near four-tonne outflow on Friday. Its holdings slipped just over 14 tonnes or 1 percent in the first trading week of the new year, compared with a rise of more than 7 tonnes in the same period of 2009.
Deutsche Bank said in a research note it expects inflows into precious metals exchange-traded products (ETP) to slacken this year as investors divert attention to more volatile commodities. "We don't expect extreme outflows from precious metals ETPs," it said. "However, growth rates are likely to be slower than 2009." Among other precious metals, silver tracked gold higher to $18.66 an ounce against $18.44. Platinum hit a 16-month high of $1,590.50 and was later at $1,587 against $1,574.50, while palladium was at $429 against $425.50. Both platinum and palladium have benefited from the launch of the first US-based ETPs backed by the metals on Friday.
"We think platinum is poised to substantially benefit from increased investment demand given its already favourable fundamental outlook," Morgan Stanley said in a note. Platinum group metals traders will be closely eyeing news on global car sales for clues on future demand for the autocatalyst materials. Industry figures released on Monday showed China's auto sales surged past the United States to reach record levels in 2009, underscoring China's importance to the global auto industry as the world's biggest market.