Gold climbs in early trading as year-end jitters knock stocks, dollar

London (Dec 30) Gold rose on Tuesday as sliding oil prices and worries about Greece's future in the euro zone sparked selling of European stocks while the dollar slipped against a basket of currencies.

That helped gold to recover lost ground after prices fell 1 percent on Monday, giving up the bulk of the previous session's sharp gains. New concerns over the euro zone economy as Greece prepares for an election next month also supported the metal.

Spot gold was up 0.2 percent at $1,185.30 an ounce by 1208 GMT, while U.S. gold futures for February delivery rose $3.50 an ounce to $1,185.40.

"The first couple of weeks of next year will be interesting," Simon Weeks, head of precious metals at the Bank of Nova Scotia, said. "The year-end pressure on the downside from producer selling will be out of the way and it will be interesting to see whether gold starts to rally above $1,200 on the back of disenchantment with the economic recovery.

"The oil price continues to come down and gold prices have come down, too, but they haven't collapsed. I think that's partly because people are mistrustful of the economic and geopolitical situation."

European shares fell 0.5 percent, led by energy companies as Brent crude oil futures fell to a 5-1/2 year low on persistent worries about a global supply glut.

Among currencies, the dollar index fell 0.2 percent, hurt by strength in the yen as investors sought the traditional safety of the Japanese currency amid end-of-year nerves over economic risks ahead.

For the year, gold is down about 1.5 percent, hurt by a stronger dollar and expectations of an interest rate rise in the United States.

Gold slumped 28 percent in 2013 as investor demand waned on the back of a robust U.S. economy and better-yielding stocks. Many analysts have forecast more declines in gold prices.

Some physical buying in China helped to support gold prices. Premiums in Shanghai were steady at about $4 an ounce on Tuesday.

"Interest in Asian trade today came once again out of China, helping the metal to a session high of $1,189.75 as $1,190 looks to form a short term resistance," precious metals house MKS said in a note.

Among other precious metals, silver was up 0.4 percent at $15.81 an ounce while spot platinum gained 0.5 percent to $1,1198.25 an ounce and spot palladium rose 0.7 percent to $811 an ounce.

Source: Reuters