Gold rose toward $1,400 an ounce on Monday after a 2 percent decline last week, with investors buying bullion as the dollar weakened, China kept interest rates steady and a US tax cut extension loomed. Spot gold rose 1 percent to $1,396.87 an ounce at 2:47 pm EST (1947 GMT). US gold futures for December delivery settled up $13.10 an ounce to $1,398.
Silver resumed its rally after last week's decline, sharply outperforming gold. Silver climbed 3.5 percent to $29.54 an ounce, dropping the gold/silver ratio to near its lowest level in four years. COMEX gold and silver futures volume were about 50 percent below their 30-day averages, preliminary Reuters data showed. Some trading desks and funds have closed their books ahead of year end. In the COMEX futures markets, speculative buyers have increased net longs, or bullish positions, by 2.3 percent in the week to December 7, while silver's net longs dipped 3.2 percent, CFTC's weekly Commitments of Traders report showed.
Reuters commodities specialist Christopher Henwood said gold will set new highs by December 31, but won't break the $1,500 level until early 2011. On the investment side of the gold market, holdings of the world's largest gold-backed exchange-traded fund, New York's SPDR Gold Trust, declined by a further 3.95 tonnes on Friday.
The trust saw outflows of 8.2 tonnes of metal last week, or 0.6 percent of its total gold holdings, its biggest one-week outflow since early October. It is still the world's sixth-largest holder of gold, ahead of Switzerland and Japan. Platinum rose 2 percent to $1,697.99 an ounce, and palladium gained 3.5 percent to $753.72.